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
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New Business
More Value 9/30 (week away)
Trade Theory 10/31
Trading Experts App 12/31
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Broad Market Outlook
SPY put in a new high this week with all the scary headlines of the trade war? The market has been telling us for months that is does not care about the geopolitical games, because they are simply games. The news needs to sell fear and when there is nothing out there to scare us they force feed you the same story over and over again with scary headlines such as another $10 billion in tariffs when in the scheme of things there pennies on the dollar.
We went over this months ago however we can do a quick refresher on major news headlines, the first time people (the market) tends to over react (very short term), however when its the same piece of news being reused 934 times, no one really cares. Market participants as a whole have the memory of a gold fish after 24 hours most can't remember the headline, forget what the actually implications are. Ask yourself if you can remember right now what the trade war news was on Wednesday evening when most were scared? Hard to remember right? Guess what 99% of other people can't remember either.
News sells fear, plain and simple (and ads of course) the only red flag you use the media for is when they tell you to buy. When they say that get the fuck out, when they scare you, just remember there bark is far louder than there bite.
Going into the week ahead will be keeping an eye on the mid caps as they have been flagging nicely along with the bio's, will also be looking for some continuation in Materials and Financials however given the range bound nature they have been in, would not except them to continue much different.
Stock wise I will be looking to add to CHRW 98, CE 118, RARE 87, ANET 275, SIVB 330, HI 53, IRWD 17.55 and KORS 74.
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Macro Rotation Outlook
Cheat Sheet
Nasdaq 7400 line in the sand
S&P 500 tight wedge
Dow Jones new highs
Mid Caps flagging
Small Caps flagging
China eye on prior pivot high
Japan took profits
Europe near resistance
Emerging Markets macro downtrend
India range bound
Russia took profits
10 Year retested prior high
Bond's basing
USD pulling back
Oil flagging
Nasdaq 8400+ 12 Month Target
Nasdaq still in a tight range, line in the sand 7400.
SPY 300+ 12 Month Price Target
Dow Jones 300+ 12 Month Price Target
The laggard finally caught up with the gang and started to poke its head above the pre correction highs.
MDY Mid Cap Stocks $400+ 12 Month Target
Mid caps still flagging in a tight range.
IWM Small Caps 200+ 12 Month Target
Small caps also flagging however do not look as good as the mid caps.
GXC China +$150 12 Month Target
EWJ Japan +$85 12 Month Target
We got a great entry in Japan and was able to take some off into the vertical move that it had.
VGK Europe ETF $82+ 12 Month Target
We got a nice support buy, now its time to sit and see if it can take out the prior pivot high.
VWO Emerging Markets +$58 12 Month Target
The emerging markets remind me of telecom just a sleeping bear for now.
INDA India +$53 12 Month Target
India still range bound, will give it some time before looking to add through resistance.
RSX Russia +$30 12 Month Target
Took some profits in Russia this week after the almost vertical move that it had over the last two weeks.
10 Year Treasury Note Yielding 3.07%
The 10 year is retesting the prior high, its funny years ago if the 10 year got near 3% it was almost as if the world was ending, now its not even news worthy. As the first time it has been mentioned to you is probably right now reading this.
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 3.07% (higher = good)
Right now the 2 year Bill is yielding 2.80%
BND Bond Market
Bond market still a snooze feast, should expect some lower prices as rates continue to rise.
USD
The USD has been having a hard time holding this area, remember weak dollar good for us.
OIL
With the Saudi's trying there best to market this Aramco IPO, there has been whispers that there goal is to hold oil in this $10 range, when the guys who sell the oil say it, tends to be something to listen to.
Fun fact there is 42 gallons of gas in a barrel of oil which comes out to around $1.88 per gallon. So when your at the pump paying $3-$5 now you know why these countries fight over it so much.
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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
VGT 197 line in the sand
VDE range bound
VIS retesting prior highs
VOX macro downtrend
VAW 138 next level to takeout
VCR tight flag
VFH working its way back to highs
VNQ working its way back to highs
VDC working on 144 breakout
VHT hold your winners
VPU eye on 122
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Sensitive - sectors that have moderate correlations to overall market conditions.
VGT Tech
As long as tech stays up the prior resistance line, its all gravy, however once it starts to flirt with it, grab the check and run back to the safe girl.
VDE Energy
Energy continues to be range bound following oil, hard to be excited to buy 106 when its showing us 100 is the area.
VIS Industrial
Industrials are retesting highs and as we have seen from the other major markets and sectors, in time we should see new highs.
VOX Telecom
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Cyclical - sectors that are more sensitive overall market conditions.
VAW Materials
Materials started to wake up last week along with Financials, however they are not out of the woods yet, these bases take time and eventually go when your looking somewhere else.
VCR Consumer Discretionary
Consumer Discretionary continue to grind higher, just make note that 20% of this ETF is in Amazon, as long as Amazon grinds higher it should pull VCR up with it, however when that tide does eventually turn, expect some bloody days.
VFH Financials
VNQ REIT
REIT's went on a pretty solid run this year as they continue to work there way back to the pre tax changing levels of late 2017.
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Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Consumer Staples are trying its best to take out the prior pivot highs and as we have seen from the other major sectors, the overall move tends to be higher, just need to be patient.
VHT Healthcare
VPU Utilities
Want to keep an eye on 122 however for this sector your paid to buy pain not bliss.
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Sub Sector Rotation
Cheat Sheet
IBB 120 DCA
ITA breakeven stop
IBB Bio Tech
IBB is setting up for a nice 120 DCA.
ITA Aerospace & Defense
ITA had a solid move so far as it broke out to new highs, for now keeping my stop break even as a pull back seems to be in the cards before the next leg up.
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The New Big Picture Set Up
The Big Picture CE $140+ 12 Month Target
CE is a basic materials (VAW) stock that has been flagging near all time highs since June, as that sector which has lagged (been range bound as of late) once it is ready to poke its head above its prior pivot high, one could expect a basic material leader like CE to drift higher as well.
Big Picture Target $140+
Big Picture Entry $118.05
Stop $112.89
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The Big Picture's Updated
The Big Picture CARA $40+ 12 Month Target
What a beauty aint she? Now sure this isn't a hard level as $22 has been tested and broke a few times prior, however its back here for the 6th time over the last 4 years. Now lets take a closer look.
June it gaps up right towards that level, sells off hard (no big surprised after a 30% gap up) than it climbs right back however nope that $22 seller is still there, than over the next few months its fades and than climbs right back to $22, yet the seller is still there holding the stock down. Now is it going to break $22 Monday morning at 9:31 and never look back? Probably not, that's why we can DCA $22 if it does, hold it, if it ticks it and is still not ready, than you have plenty of ammo to add later.
Solid breakout so far ripping 10% higher, now it can easily come back to breakeven, and if that's the case a stop a dollar lower isn't going to do much, if this first attempt is a breakeven trade so be it.
Big Picture Target $40+
Big Picture Entry $22.05
Stop $21.89
The Big Picture SIVB $400+ 12 Month Target
SIVB is a financial name that has been flagging for 5 months at highs, last week it did try to take out new highs, however it was not quite ready which tends to be a theme we run into. Now it didn't get smoked or sell off hard, just started to flagging in a 2% range.
DCA'd in SIVB earlier in the week and was looking to add through $330 which keep me out of that add by a few pennies. Will look to add on the $330 break.
Big Picture Target $400+
Big Picture Entry $330.05
Stop $312.89
The Big Picture DHR $140+ 12 Month Target
5 times DHR has rejected $104, is this the time it goes? That is anyone guess however the probabilities are a bit more in our favor are these continued attempted, lets just be real with ourselves. We can put on a tight risk buy on $2 here if she is ready.
Nice follow through after the minor pull back it had, those minor pull backs tend to shake most of us out as we catch the first leg perfectly, however the more we can work on letting the name pull back and pivot is huge because once your up 10-15% in a name its much easier to give it space. Still keeping the stop breakeven for now.
Big Picture Target $140+
Big Picture Entry $104.05
Stop $103.89
The Big Picture AFL $60+ 12 Month Price Target
This $46 level in AFL has been setting up all year and as of late it is handing us the tightest risk entry as possible, now sure the real out is $1.50 lower however we are seeing how we can sneak in on less than $.50 risk.
We have been waiting on AFL to take out this resistance level for months now, and it is finally showing us its ready, now its time to be patient, upping stop vs 46.
Big Picture Target $60+
DCA $47.05
Stop $45.89
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Have a friend that is interested in trading? Bring him or her in and you both will receive a free month, contact Ben for more info!
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