Broad Market Outlook
There was a study done years ago that compared the pain inflicted on burn victims when there dressing had to be changed daily. This was an extremely painful, yet necessary daily routine. The problem was that the nurses often would remove the bandages slowly with the hopes of inflicting less pain. When in reality removing the dressing faster caused less pain overall even if it felt like the opposite.
Last year we had plenty of fast ripping off of the markets band aids as we can see the visually steep sell offs in 2022.
Now most of 2023 was the oppoiste of that with breakout after breakout with virtually no need to even think about ripping a band aid off until recently. We can see the steepness of the current breakdown stage is far less aggressive compared to what we saw in 2022. This slower break down stage often will feel more painful as the band aid is slowly removed.
I was in the camp that we would have been new highs by end of year, yet for now that seems to be at a stand still. Scanning most sectors, the story seems to be the same. Simpy avoid, avoid and avoid for now until the band aids have all been slowly removed.
Virtually every sector is near a recent pivot low area of support or heading towards a new lower low. Utilities is the weakest in the bunch being the first sector to put in a new 52 week low last week as it broke down through the lows of the base it was in.
Now on the flip side even the stronger sector out that is not really showing us anything very promising.
As it got within 1% of retesting the all time high, the Energy sector seems poised to be forming a topping pattern. That is bound to roll over lower in the short tern under this 126 area.
As the recipients of this band aid pulling off experiment, we could ask for the nurses to just get it over with and rip them off. But rarely does Mr Market grant our daily wishes.
Less is more right now and trading lighter is often far wiser then trading heavy.
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Sensitive - sectors that have moderate correlations to overall market conditions.
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Cyclical - sectors that are more sensitive overall market conditions.
Defensive - sectors that tend to outperforming during sub par market conditions.
Big Picture Set Up's