Broad Market Outlook
The market does a great job of dangling the carrot in front of investors until that is all they can see, such as the market continuing to grind to new highs, yet when they switch that carrot out for hay, most cannot adjust to the new treat being offered.
We officially had the correction that most were waiting for, who said they would buy and exploit those deals, yet when it happens, its often always the exact opposite.
Right now we are starting to see shorter term bottoms being formed in virtually all the major markets and sectors. This type of action (bottoming) can be difficult and if you do not like to eat hay and rather wait for the carrots, there is nothing wrong with that. Remember no one is forcing you to buy or sell anything other than yourself.
Shake made a great point last week related to simply trading the major markets instead of individual names and I could not agree more on that statement. I have avoided bringing that up due to the fact that for those (including myself) who are simply buying the major markets and sectors weekly would take away from that mindset and then the shorter term trading of those sectors would take over. Which is a waste of time in the long run, but in the short term can give better or less risky trades then individual names are presenting.
As always when everyone is thinking the markets going lower, it often goes higher, when everyone know's the FED is going to raise rates, they do nothing.
We are seeing the markets and sectors starting to form this wide ranges that will be great for us in time to trade in. The SPY is trading in a 12% overall range, Tech is in a nearly 20% range, with the rest squeezing into between those ranges.
Buying near support of these ranges are often the most profitable, however you have to really come in with a contrary mindset. In simple terms, on the down days when the outlook is bleak are when you need to wait for the turns. If you are waiting for the confirmation, say buying on the big up days when the markets or sectors are up 2-3% you will be too late to the trade waiting for confirmation.
Be patient, be light, and remember doing nothing when the market is choppy often can be far more profitable then heading out into the storm to try and prove a point.
From Ben G
Macro Rotation Outlook