The Big Picture Outline
- Broad Market Outlook
- Macro Rotation
- Sector Rotation
- Sub Sector Rotation
- New Big Picture Idea
- Updated Big Picture Idea's
Broad Market Outlook
The last two weeks market wise has been pretty much a consolidation, yet for you it probably has be more of a breakout for your account as the names we have been trading have been on an absolute tear.
For myself May was somewhat Vaca mode with two trips back to back, as it was impressive and motivating to see how everyone has been stepping up and coming together as a real team. Something that our prop desk where you sat next to the same person for 14 hours a day, there was no where near the comradery or team work that we have in the Alpha chat.
Now we are starting to get into the summer months of trading, where volume tends to dry up like the Mojave desert. This is not to say that for the next 3 months there will be nothing to trade or just to pack it up and go home. This is simply just a time to be aware of overall market conditions as smart money tends to be traveling and away from there computers.
Major market wise we have seen the small caps leading to new highs, with Nasdaq and tech following close on there tail, the SPY still has a lot of work to do before we see new highs anytime soon.
Sector wise Energy which has been the leader all quarter that is starting to leak some Oil, when the money starts to rotate out of that sector I will be keeping my eyes on Tech and Healthcare as they both have been setting up the best chart wise for the next leg up.
Stock wise AKAM is starting to show similar traits to NKTR, I am in no way expecting another 400% increase in its share price in 6 months however it is a name that realistically a year from now could be a 100% higher on a strong break of $78 and a positive catalyst.
Macro Rotation Outlook
Cheat Sheet on Macro Rotation
Nasdaq 7,000 level
S&P 500 272 level
Dow Jones 250 level
Mid Caps 357 level
Small Caps holding
Europe 59 DCA
Emerging Markets 45.50 DCA
China 114 DCA
Japan 60.50 DCA
India 35 DCA
10 Year sub 3%
USD recently strong, broadly weak
Oil turning after monster run
Nasdaq 8400+ 12 Month Target
Nasdaq is flagging under 7,000 in a 200 point range than if it breaks should send us to retest those prior highs.
SPY 300+ 12 Month Price Target
The SPY is starting to shape up however has much more work to do than the Nasdaq, so far it has tickled that downtrend break and we can see it flagging very tightly, however I would not expect much fire works through that level, we would really need to shake the tree to get a real powerful move to break the prior pivot high and current ATH. Above $274 vs $270 makes sense to be risk on.
Dow Jones 300+ 12 Month Price Target
25,000 in the Dow has been a battle ground all year for the DOW, the longer it can consolidate and stay above 23,500 the more likely we can see these 30 stocks get back to highs.
MDY Mid Cap Stocks $400+ 12 Month Target
Mid caps are following behind the small caps as they are the closest to taking out new highs however running into sellers at $357, above there and $362 its all blue skys for the mid caps.
IWM Small Caps 200+ 12 Month Target
Small caps have been the first to take out there pre correction highs which is a great sign from a risk preservative.Small caps tend to be more risky than a large cap so it makes sense that they would be the first to breakout after the correction during the start of the year (as broadly its been a risk off environment for the average investor). If the risk on sector among the caps is leading, should be good for the slower giants in time.
VGK Europe ETF $82+ 12 Month Target
One day they look A+ than a few short days later your wondering why the fuck did you buy the high? However with DCA'ing into these sectors you have to take the golden basement buys with the top floor elevator top tips. For now will look to add above $59 however seems that a potential retest of $57 could be in the cards, if that is the case will look to buy after a low is put in.
VWO Emerging Markets +$58 12 Month Target
Can't get much tighter than this wedge in VWO, will be looking to DCA above $45.50
GXC China +$150 12 Month Target
Great Wall of China $106, above $114 in time we should see the grind back to all time highs.
EWJ Japan +$85 12 Month Target
We all know the 20 year level in this EWJ is $66 so we have not been sweating her too much, given its back to this $60 level of support for now the 3rd time, it will probably want to pus lower which is fine, when it wants to turn we will add back up, for now the DCA will be above $60.50
INDA India +$53 12 Month Target
Gappie little fucker, had a $33.01 BS and had to pay up a bit which isnt the end of the world, strong buying after pushing down through a new recent low is a great sign and exactly what we want to see so INDA can finally break this $35 so my top ticking sell can make some coin on that one add. Will give it some time and look to buy $35 in time.
RSX Russia +$30 12 Month Target
Russia is trying to fill the gap down which as we all know tends to take much longer than you or myself would like it to take, for now same story holding the stock we got after the gap down and in time will look to add $21.50.
10 Year Treasury Note Yielding 2.93%
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 2.93% (higher = good)
Right now the 2 year Bill is yielding 2.48%
Weak dollar = Good for stocks, however cant sleep on this 95 level.
What a run up 100% since last summer, given the recent tear its been on and the cracks starting to show some weaknesses seems healthy that oil and energy comes back down to earth for a bit.
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.
- 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 184 DCA
VCR holding vs 162
VAW 137 level
VHT 159 DCA
VFH 71 DCA
VDC Avoiding any DCA for now
VNQ Holding vs 75
VPU 115 DCA
VOX DCA 84
Locked some profits in last week after catching almost a $10 point move in a straight line, for now will get it time to set up again new level is $144 however not too thrilled to have to buy that just yet.
VCR Consumer Discretionary
VCR just grinding higher, did not get the break that we were expecting through $164 however we cant always get what we wish for. For now could hold vs $162 to see how it reacts to $168 for the 4th time.
VHT is a prime example of how slow sectors and markets can take to move, we were able to buy $156 over 7 times, now its starting to show that just maybe there will not be an 8th time for a bit, for now will look to DCA $159
Finally got stopped out of the rest of VDE before the 3% gap down, now we caught the first leg of that up move very well however a lack of patience cost us the 2nd leg which was a costly lesson learned, now that VDE is starting to fuck everyone, we will be just as patient as we were lack there of last time. Low $90s will look to start nibbling anything up here I'm good until something sets up.
VDC Consumer Staples
Had to DCA down here however chart wise seems that a push through lows seems much more likely, seems a real shakeout is needed before a real change of trend can occur.
We were able to get some tight risk stock back and for now just holding, $79 is the recent high that it will need to set up and take out in time.
We are starting to see how $109 is becoming a level of support to hold this sector up, $115 will be a level to DCA in time.
Will be DCA'ing through $84 when telecom wants to take it out, however we might see a new low before that happens.
Sub Sector Rotation
Cheat Sheet on Sub Sector Rotation levels
WOOD 83 DCA
IHE 150 DCA
IBB 108 DCA
XT 37.25 DCA
BND potential start of change in trend
3rd times a charm in WOOD $83 will be buying back what I sold.
Will be adding up through $150 for 3rd times a charm on that level.
IBB Bio Tech
Will be DCA'ing up through $108.
XT Exponential Tech
Will be DCA'ing above $37.25BND Bond Market
Bonds have been the bastard step child for quite some time now, however things can always change.
The New Big Picture Set Up
The Big Picture AKAM $150+ 12 Month Price Target
We recently traded AKAM back in Feb/March and caught a nice little chop in it, as of late after a pull it, its marching right back to those $78 highs. Now doesn't this 20 year level look somewhat similar to an old friend of ours?
Remember little $25 NKTR that set up during a similar 20 year level.
Now as of late we can see how this $78 is a solid level, however it is going to need two things, the right room and time. AKAM is a prime DCA candidate this is not going to be a name that we can buy once heavy and hold for a clean 100% move. To start I will have a DCA above $78 giving it at least $10 worth of room.
Big Picture Target $130+
The Big Picture's Updated
The Big Picture HDB $130+ 12 Month Price Target
Recently we can see how $100 has been a battle ground almost all year, tried it back in April however it was not ready, recently however it is showing a different tune that it has not been showing in quite some time, now it is still holding under $100 and above $94 so the tighter it gets the more conviction we can have to continue to add to this base.
Big Picture Target $130+
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.
DCA Entry TBA
Big Picture Entry $112.05
Big Picture Target $160+
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.
Big Picture Entry $46.05
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.
Still grinding higher and $4 from the BP target of $110 if still in earnings are in a few days would be cautious holding through.
Big Picture Target $110+
Trading Experts Exuma Retreat
As you know JD was asleep at the bar during the taking of this group shot lol
Ocean front views from the backyard.
The underwater cave that Rob, Sam and myself decided to climb to the top of and drop in from.
Are we going back to Exuma next year?
You bet your fucking ass we are!
In short Exuma was an amazing time and by far my favorite vacation to date, watching Kriss (who is 6 foot+) break dance against JD looked like the Rock and Kevin Hart trying to fight, you had Rob losing his passport from jumping off the boat at full speed, still cant remember which one of thought it was a good idea (think it was me, sorry Rob, lesson learned). Carl playing the hardest trap music at the bars that are use to slow mellow country music and Moe keeping us on track where we actually discussed the market and trading each day.
In the short few days we were there, we befriended the major of the island, a private chef, a few boat captains and thee best property manager we have ever met. Judy you a real one! (She cant read this so not sure why I'm shouting her out)
I am usually one to visit a place and be onto the next one, however Exuma was such a blast, it will be the location for the next TE annual Summer retreat. The dates are May 15th - 19th 2019 (a day longer). The cost for the trip will be $1987, my goal for next year is to have 30 Alpha members attend.
We are working on a potential end of Summer Trip in August to Belize or another tropical Island if you are interested please let me know so I can figure out the logistics.
It was truly awesome getting to meet Hunter, Heaven, Nicolas, Gina, Carl, JD, Kriss, Mo, Sam and Rob this month. We are looking forward to getting to meet you all as we continue to set up these fun and (hopefully) informative vacations.