Market Outlook
Historically February and June tend to be weaker months for the stock market. Now granted that most of February the market spent that time flagging under blue sky highs. We are only quick to remeber the few painful days, after the market hit new all time highs just a week ago. This last week felt somewhat brutal as the market sold off at highs and could not catch a bid.
This choppy action can be very frustrating day to day as one day the world looks to be ending and the next the sun couldn't be shining brighter.
As the market continues to form either a stage 3 topping pattern or continues to form a massive bull flag for the next leg higher. There seems to be 3 key areas to focus on when putting on risk or taking risk off the table.
Right now we are in no man's land which is this 585 to 600 area. With the market dead smack in the middle of the overall range, its mostly a coin flip on where the market is headed. Where when the market is up near the 605 to 610 area, that has been the area to take profits. Eventually that area will break to new highs but for now, we are in this range bound market broadly speaking.
If the end of week strenght spills over into this week, Consumer Staples have been very strong.
Healthcare looks great, Tech looks to be a bargain near support and Financials are flagging nicely at highs.
If Friday's hubris is faded this week, there are plenty of major sectors at support that if there is a bearish engulfing close below those recent lows, it could spell trouble. The QQQs, Mid & Small Caps all fit into that boat.
With this back and forth action, I have been trading much lighter and extremely tight with my stops. In the book, The Logical Trader, Mark Fisher talks about time specifically when related to price action. If he was expecting a breakout of $100 for example, and the name broke out of $100 but only did so briefly and could not sustain a move higher within a window of time he deemed worthly. He would exit the position inregardless of the stop or game plan. This has been something that really has not been covered in any other trading book I've read while being very insightful.
There have been a few "shot" trades I've take recently, mainly buying some major sectors at support (IWM or MDY) earlier in the week. Spoiler alert both trades failed but as they came into support and I got long on the bounce. Neither really bounced much and quickly came back to my price after mid day. Technically they didnt fail my stop but would have on Friday. I was able to take note of how much time the name was spending near my cost basis when it should have been flying away from it if real buying was occuring.
Both trades failed but resulted in less then half a percent losses because I was able to take notice of the time they were spending close to my price. Instead of sticking with them vs the proper stop that would have been triggered by the end of the week for a much greater loss.
As the market leaves the choppy price action of February in the rear view, time will tell if Fridays strong buying will continue in the new month. As the first trading day of the new month often can dictate the broad theme for the month ahead.
From Bennett
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Macro Rotation Outlook
SPY
Dow Jones
Nasdaq
Mid Caps
Small Caps
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Sector Rotation
Sensitive - sectors that have moderate correlations to overall market conditions.
Tech
Energy
Industrial
Telecom
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Cyclical - sectors that are more sensitive overall market conditions.
Materials
Consumer Discretionary
Financials
REIT
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Defensive - sectors that tend to outperforming during sub par market conditions.
Consumer Staples
Healthcare
Bio Tech
Utilities
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Big Picture Set Up's
CTAS
NFLX
PAYX
PCAR
REGN
YUMC
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