The Big Picture Outline
- New Business
- Broad Market Outlook
- Macro Rotation
- Sector Rotation
- Sub Sector Rotation
- New Big Picture Idea
- Updated Big Picture Idea's
(click on each chart for a bigger version)
Broad Market Outlook
We saw how for mostly all major markets a strong start of the week ended with mostly all markets and major sectors running into resistance and fading. With that being said stock wise, that was not the case, Shake had some monster calls as well as the Alpha members, CVNA up almost 30% in a few days, SAIL up almost 30% in 2 weeks, all energy names up 10%+ in the last two weeks, LULU grinding higher, WING flying through $49, BCOR up almost 10%, and the list goes on.
Showing us that regardless of what the SPY or DOW is doing, if we focus on what we do best, it does not really matter to us what the overall market is doing.
Now with that being said, we cant puff our chests out and think were big swinging d's because the market eats that shit for breakfast. End of the week we start to see a shift with weakness across the board. Virtually every major sector closed red on Friday, so we have to take those clues for what they are. We did very well as a group locking in profit towards the end of the week. For the week ahead I will be very patient as I am expecting a minor pull in to continue. Now that does not mean that its time to slack off. Its 11:39 PM on Saturday night and there's still more charting to do. If my thoughts are wrong and there are levels to buy up through that is insurance against myself. So many opportunities out there we just need to continue to find them.
Macro Rotation Outlook
Cheat Sheet on Macro Rotation
Nasdaq 6800 add in time
S&P 500 268 add in time
Dow Jones 248 add in time
Mid Caps 350 add in time
Small Caps holding off
Europe 60.50 add in time
Emerging Markets 47 add**
China 110 add
Japan 61 add
India 35 add
Russia holding off
10 Year Strong
USD Weak
Oil Strong
Nasdaq 8400+ 12 Month Target
Last week the market handed us a gift to take profits in a bunch of names, we were very selective and got paid as a result, broadly seems the market wants to test the lower 6,000 area, 6800 broke for the second retest of that area recently, eventually that will be the spot to be putting risk on through however it needs time to set up.
SPY 300+ 12 Month Price Target
Just enough to push through that 268 level to trap most thinking it was going to be a straight line back to highs. Expecting some type of pull in where that 268 will be a spot that we will be wanting to put risk on through.
Dow Jones 300+ 12 Month Price Target
Lower highs still intact, chart wise looks fine, above $248 in time will be the spot to add through.
MDY Mid Cap Stocks $400+ 12 Month Target
As you are starting to notice a similar trend as we are running into resistance as we continue to form lower highs, this was why we were looking to be more defensive into the end of the week to have less risk on for what seems to be a weaker week to follow.
IWM Small Caps 200+ 12 Month Target
My favorite 3rd times a charm set up so far has been thwarted, long ways from support and showing no reason to put risk on here.
VGK Europe ETF $82+ 12 Month Target
Europe showed us that the market could break those lower highs, however for now it is showing us that $57 is support and $60.50 is resistance, for now it is just a waiting game or the range game (buying at support, selling at resistance)
VWO Emerging Markets +$58 12 Month Target
We can see this wedge forming in the Emerging Markets, $47 is the real spot that needs to break vs $45.50 for now, however will look to continue to nibble above $46.50.
GXC China +$150 12 Month Target
Early to the $110 buy, so far $106 is the line in the sand, will be looking to add above $110 in time.
EWJ Japan +$85 12 Month Target
Japan getting tighter and tighter, as you might start to be noticing that after a crazy market environment, it tends to get less crazy and less crazy, until it needs to break that cycle and start over, as we can see here from 10% drops, to 5% drops to almost unchanged as the weeks press on. Above $61 is the spot however given how it hasn't shaken anyone out recently would not expect too many fireworks as its almost too easy to buy (I will still buy through $61 regardless).
INDA India +$53 12 Month Target
Same story different country, ran into a prior resistance level and started to turn, will add above $35.
RSX Russia +$30 12 Month Target
Its the wild wild west over in Russia, so far as long as $19.70 can hold up should be fine to continue to try and fill this gap.
10 Year Treasury Note Yielding 2.95%
10 year T Note has been in this range from 2-3%, in time we should see that 3% breakout, we just want to make sure the 10 year is always yield more than the 2 year T Bill.
You might start to hear terms like "inverted yield curve" in the media. There is one historic leading indicator that will give us a big red flag that a recession is on the horizon which is an inverted yield curve.
Very simple an inverted yield curve is when the 2 year Treasury Bill pays more than the 10 year Treasury Note.
Right now 10 year Note is yielding 2.95% (higher = good)
Right now the 2 year Bill is yielding 2.26%
USD
Weak dollar = Good for stocks, however cant sleep on this 91 level.
OIL
So far oil has been very strong through that $70 break out, long it holds up $70 it should continue to grind higher.
Fun fact there is 42 gallons of gas in a barrel of oil which comes out to around $1.66 per gallon. So when your at the pump paying $3-$5 now you know why these countries fight over it so much.
Sector Rotation
Key points
- For any of the major markets or sectors, we are parking these positions in a taxable account looking to hold for a year plus (Long Term Capital gains)
- Meaning we are willing to hold positions against us as overall sectors and markets are much less volatile than individual names.
- We are buying or adding (dollar cost averaging) when there are actionable set ups.
- We are selling for either profit or getting out for breakeven if better opportunities arise elsewhere in other sectors.
- If you plan to add this strategy to your portfolio please discuss it will me so we can make sure you are not parking these ETF's in retirement accounts locking up tax deferred capital that can be put to better use in individual stocks.
Cheat Sheet on Sector Rotation levels
VGT 176 add in time
VIS 143 add in time
VCR 162 add in time
VAW 136 add in time
VHT 158 add in time
VDE stop below $100
VFH 71 add
VDC 132 add
VNQ 75 add
VPU 113 add
VOX 88 add in time
VGT Tech
Will be looking for VGT to take a stand and hold that prior pivot low of $164, if there is a chance to add up through $166ish vs that area that will be the spot I will look to add back what I got stopped out on Thursday, eventually will be looking to add through $176 in time.
VIS Industrial
$140 add gave us a nice move, nothing to lose sleep over and also a move not to look to take any profits in, simply just an add. For now will be seeing how $140, $138, $136 and $134 can hold up on the way down, eventually this $143 area will be the spot to add in time.
VCR Consumer Discretionary
Got stopped out of some of the adds from two weeks ago for around $6, will look to see how far VCR can pull in, eventually $164 will be the add, big line in the sand is this $152, that breaks not good bro.
VAW Materials
Got stopped out Thursday from those sick adds two weeks ago for almost $9 on around $1 risk. Lower highs not the best sign, should expect some time of pull in and will look to add through that high in time.
VHT Healthcare
$156 has been the spot as of late however this week how it was setting up it just didn't seem worth the add and glad we held off, VHT still in this $10 point range so lets get it some time and see if $148 can still keep this chart in tact.
VDE Energy
We got a sick move in this VDE and all the oil names these last two weeks, a major lesson that I have learned from this was patience, for 3 months we were buying this range and even myself, was too quick to start taking profits. As long as it holds above $100 could see another push a few dollars higher. However for most oil names it seems they are started to show they might want to rest a bit.
VFH Financial
Had an add late last week and will look to add through $71 this week as $71 has been quite the battle ground these past few months.
VDC Consumer Staples
Sharp three days down after a tight flag, took out that prior low and closed at lows, should expect more continuous to the down side next week, will look to add back up through that breakdown area through $132
VNQ REIT
$76 is the real battle ground in the REIT space however will start to nibble above $75 and add more above $76, if $74 wants to break, its close friends (support) of $73 and $72 are right there behind him, however below $72 his crew thins out quick below $72.
VPU Utility
Eventually something has to happen, we can see how $113 has been resistance for all of 2018 and we are seeing how the buyers have been stepping it up, below $109 should expect a roll over to retest those prior lows, above $113 will add.
VOX Telcom
Ripped a fast $5 points off lows showing there still some life in this sector however the lower highs still leaves the fans in there seats, as long as it holds above $82 this sector should be in good shape to eventually break this major down trend, and the lessons of patience from the recent VDE trade should pay dividends when this sector finally goes.
Sub Sector Rotation
Cheat Sheet on Sub Sector Rotation levels
KBE 48.50 Adding
WOOD Stopped out of most
IHE 150 Adding
IBB 108 Adding
XT 37 Adding
BND Lower
KBE Bank's
The add on Friday nothing special yet, just an add, will look to add above $48.50, anything above $46 is fair game.
WOOD Timber
The measured move of this pattern is to around $86 however as you and I both know stocks dont just trade in a straight line, took some gains off the table and will look to see if $78 will start to act as support.
IHE Pharamaceutical
So far the adds were working the last two weeks, for now seems we need to see if this $142 can flex and hold it, will be adding through $150 for a move back to $156 short term.
IBB Bio Tech
So far IBB has held $100 ($300 pre split) like a champ so far however still in a wide 8% range, so far we got two decent adds up in the middle of this range, the next spot with be $108 that will need to break, if we continue to flirt with $100 we should prepare for lower prices.
XT Exponential Tech
Was early to the $37 buy (what's new) will add back through in time, anything vs $35 is fine.
BND Bond Market
Buy bonds, it will be fun, they said. Remember rates rise, bonds down. $80 is a major spot to keep an eye on. Just to give you an idea or (to appreciate stocks) over 18 months if you were perfect and bought lows and sold at dead highs you would have made less than 2%.
The New Big Picture Set Up
The Big Picture NOC $500+ 12 Month Target
Now first let me start off by saying, yes we are late as fuck to this name and even this sector. Recently I felt that the overall run in the industrials was losing steam. Shit just a few months ago this stock was $100 lower. Learning my lesson from BA through $240, getting stopped out the day before the start of a $120 point rally in a straight line higher was a lesson to tell me to change my tune on this sector and this name, chart below.
Or watching Amazon gap and go 60%+ in a few months. Is more or less telling me to do odd lot my prior thoughts on the sector.
Now sure I fucked those two up, however at least I rode the CAT for a while.
Now with BA, AMZN and CAT, all three of these on there daily and weekly charts got pretty parabolic and have came back down to earth since, yet still holding up near highs. So lets take a look at NOC on the weekly.
Does that chart look all that parabolic to you? Sure as of late it had a pretty strong move however more or less just a gradual 45% angle that is started to get a little more vertically in nature. Where NOC is at currently is reminding me of CAT at $140 before it went on a breeze of a $30 point move in a few weeks. Now is NOC going to do the same? Who the fuck knows, all we know is $360 is the level, to find out a button will have to get clicked. So yes you win Industrials and NOC fine I will buy you through $360.
Big Picture Entry $360.05
Stop $332.89
Big Picture Target $500+
The Big Picture's Updated
The Big Picture DIS $160+ 12 Month Price Target
It is starting to seem that for these bigger picture idea's, it is harder to really pick the exact day to get in and stay in for the major move, where for these idea's going forward similar to sector rotation. I am going to focus more on the spots to add vs the real outs to focus more on slowly building into each of the Big Picture Idea's to help separate away from the momentum buys that need to be exactly perfect.
This should in time help in two major factors, one will help instill more patience and also help nudge the idea of dollar cost averaging where you can really be in for the bigger % moves vs the heavier faster moves. There is no one with a gun to your head saying pick one or the other, just more of a mental mindset, where one might be a shorter term trade while the next might be something you want to set aside and hold.
For DIS we were already adding down near $99 vs $98 on super tight risk, and started to add $101. For now Big Picture the level that needs to break is $112 now you and I both know simply just buying $112 day 1 like trying to buy ALNY at $140 is a hard ask for most, yet if your already in from 10% lower, its much easier on the mental capital to add when the time is right.
When it comes to dollar cost averaging for each entry you want to be light, 1% of your overall capital could be a good starting place. Example if you have $100,000 you would invest $1,000 each time, also giving each add at least a week before adding again. If you have $10,000 it would be $100 or 1 share DIS at a time. Now sure this sounds boring AF and that's the point, when its boring you can let the stock breathe and you can hold through the ups and downs. Remember we are looking to get into this positions for the longer term, 3,6,12+ months, it might be boring the first few weeks with the positions, however you and I both know those small percentages add up in time. Same goes with DCA.
So far we have been buying $99 and adding $101 and $102, so far DIS is showing us it wants to consolidate a bit which is fine, will continue to add $102 and will hold through earnings.Feller Entry $102.05
Big Picture Entry $112.05
Stop $95.89
Big Picture Target $160+
The Big Picture NVRO $130+ 12 Month Price Target
NVRO has been setting up for this break for over a year now, we can see how $90 is still the level that needs to break and could just as easily still pull back in a bit, however in time NVRO is setting up for what could be a WIX type move.
Now I will be the first to admit that I mooked and took some profits early however that's life, if NVRO does break with some juice will be looking to sell at $107 to sell at that prior high than hold some for the Big Picture move.
We can see that NVRO has started to break this major downtrend however with zero power (it has came a long way already) knowing that overall my price is shit took off most on Friday to free up some capital as $94 seems to be a much more important level in time. Triggered $90.05
Next add $94.05
Stop $82.89
Big Picture Target $130+
$38 is still the spot to start the feeler for this name.
WVE is showing us that $44 is the new spot to break however still even this tight range is 10%, so you need to take that into consideration and be light with the adds.
MU had to shake the tree before that monstrous breakout, we want a shakeout in LULU to get ready for a feasty move through that $82, a push down through $75 would be ideal.
We got jerked around for months in this LULU and it finally broke on great earnings, be patient, this is all new price discovery, pick an amount of stock that you are willing to give back to $77.89 and lock em away. Trade the rest how you see fit, however if we had to flip a coin and say LULU higher or lower than $78 in 3-6 months would have to say higher. Should be looking to at least to $100 for now.
LULU just slowly grinding higher, seems as of now a stop can be moved up vs $94 as we know the sharper this increase gets without a shakeout, the harder and faster they tend to become when it happens. $93.89 stop is cheap insurance on your working swing.
Profit protection time vs $121.89 for most, good to still hold some back as your getting paid 4% a year to hold, will look to add back on any weakness vs $110.
The Big Picture MOMO $70+ 12 Month Price Target
MOMO has been on our radar as of late from a technical standpoint, however do you know what MOMO does as a business? Crazy question I know, however they are the Chinese Tinder. I don't want to get too deep into the fundamental story because were traders however knowing this information and seeing how successful both Tinder (owned MTCH) has been as well as Bumble (owned by Badoo private). Both extremely successful business here in the states, however in China its a much bigger market that people are willing to pay for. Now MOMO is a subscription business which is consistent however it is not a sexy bio tech. Need to hit up the Red Army and find more out about it if it really is the next Bumble of China or the next Tinder.
Chart wise could sneak in at $38 however it seems best to just let this thing really set up and take it through $40 and look to add above $46 which is where we should expect the real move to be.
$38 is still the spot to start the feeler for this name.Feeler $38.05
Entry $46.05
Stop $32.89
Big Picture Target $70+
The Big Picture WVE $70+ 12 Month Price Target
We caught a nice move in WVE where a few of the members literally caught the top of the short term move for over 30%+ in a week, I on the other hand was not watching it as closely and got stopped out for most for a measly 19%, cue up the baby violins.
Recently it started to drift back down towards the prior breakout level of $40/$42, so far I have taken two small shots in it and see how I am just too early which is fine with me.
It closed under $40 and other than $37 below that line in the sand it has a far way to go until the next pivot. For now its just on the radar for adds above $42 for an eventually move to retest those prior highs and down down the line to take those highs out. Given the blood in the streets this week, felt it was best to have this more of as a stock to watch not a stock to go out and buy just yet.
WVE is showing us that $44 is the new spot to break however still even this tight range is 10%, so you need to take that into consideration and be light with the adds.Triggered $42.05
Add $44.05
Stop $35.85
Big Picture Target $70+
The Big Picture LULU $110+ 12 Month Price Target
This LULU has been wearing down the patience of most however Big Picture wise its just chilled and for the most part has been doing everything we would want in a stock. Consolidating at highs on tight risk. For this name to really get going still feel it needs to really shake the tree before we are going to see a powerful momentum break of $82. Lets look at MU for example.
MU had to shake the tree before that monstrous breakout, we want a shakeout in LULU to get ready for a feasty move through that $82, a push down through $75 would be ideal.Now lets take a look at another name that spent a few months also consolidating near highs. Same name also had a shakeout that is barely noticeable on the chart now before ripping for months.
In LMT I just kept buying it the tightest flag for months only to eventually stop myself out the day before the start of what became a $100 point rally. LULU is reminding me of the same story.
We got jerked around for months in this LULU and it finally broke on great earnings, be patient, this is all new price discovery, pick an amount of stock that you are willing to give back to $77.89 and lock em away. Trade the rest how you see fit, however if we had to flip a coin and say LULU higher or lower than $78 in 3-6 months would have to say higher. Should be looking to at least to $100 for now.
LULU just slowly grinding higher, seems as of now a stop can be moved up vs $94 as we know the sharper this increase gets without a shakeout, the harder and faster they tend to become when it happens. $93.89 stop is cheap insurance on your working swing.Triggered $82.05
Stop $93.89
Big Picture Target $110+
The Big Picture JAZZ $220+ 12 Month Price Target
JAZZ has been off our radar for almost a year now as we last tried it through $156 however we were too early. Recently it has been started to set up for a move through $156/$160 eventually through that area we should see JAZZ take out those prior highs.
Still grinding back to $160, would not expect fireworks however the spot to add.
Trigger $160.05
Stop $143.89
Big Picture Target $220+
The Big Picture CVX $160+ 12 Month Price Target
We made a mistake when we were focusing on the energy sector and that was focusing on XOM sure chart wise it was a great value play and had the smallest amount of risk from our entry the overall headwinds were still south.
Yet the leader CVX received much more love. So far we can see how there's two key areas we want to watch, $120 and $134 while the real line in the sand has been above $100 in CVX for going back as far as October 2016.
If Energy continues its overall weakness as it hovers near support of its wedge, we want to keep an eye on CVX to see if it can hold up vs $100. If it can great signs where we can start small and add through levels. This will be a patient one. Remember this is a heavy thick oil name, not a light and wide bio tech.
Profit protection time vs $121.89 for most, good to still hold some back as your getting paid 4% a year to hold, will look to add back on any weakness vs $110.Entry $118.05
Stop $121.89
Big Picture Target $160+
