Broad Market Outlook
As the market did an impressive job bouncing off lows and looking as if it was going to easily break up through 460 and climb to 480, the opposite seems to be the reality.
As we pull back into the lower area of this recent range (460 to 420), we have to remember that the likelihood of 420 holding this time around is much lower then when it held the time prior.
Other then for the obvious reason that the more times support is tested the more likely it is to break but also for the chart pattern that we can see forming on the daily chart. As a head and shoulders chart pattern is not a bullish one.
If we continue this pull back into that area, it seems there's 2 outcomes that I would be at the top of the list.
1. A shakeout into 420 and a reversal move back into the current overall range of 420 post shakeout area and the ATH of 480. That I tried to visually show below.
2. The head and shoulders pattern continues to the downside as we head back to the 400 psychological level of support that was not tested since it broke through. Which is an impressive feat if you think about it.
Sector wise, Energy is still leading the charge higher and if have been holding those names you should see higher prices throughout the rest of the year however getting in up here will most likely be a costly one.
Utilities, REITs and Financials all have great macro levels setting up and could be worth keeping on the radar as they pull in near there own major support levels.
Similar to how the SPY is trading and looking as if it wants to "h" lower, the Large, Mid and Small Caps all look the same, along with the Industrial's and Tech sector following in there foot steps.
While Telecom is giving us the biggest crystal ball of the future as it left its topping pattern and has been in a controls breakdown. Most of the names above seem to be in their own topping patterns.
As much as we want scenario 1, where we shake out the low and bounce higher, Telecom is telling us we can dream, but that isn't going to make it true.
As much as we want or try to fight the markets action after the rug gets pulled, those are those once in a few year buying opportunity. On the active side, pickings are slim but on the passive side, let those buy programs continue to do the heavy lifting for you!
From Ben G
Macro Rotation Outlook