The Big Picture

by Ben G October 06, 2018

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

Trade Theory 11/31

Trading Experts App 12/31

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Broad Market Outlook

This week we saw the FED raise rates which pretty much everyone and there mother expected. The markets brushed it off as barely even news, remember a year ago when we had the first rate hike and everyone was freaking out? A few rate hikes later its all around yawns. With the Nasdaq and SPY grinding higher its all par for the course, however the Small Caps did show us a little warning breaking support this week and with Mid Caps also heading near major support it will be something to keep an eye on.

As a group this week was very impressive to see the Alpha chat really working together, I had the total profits locked in somewhere in the $70,000 range and traders like Tyler skipping the comma day and going right for the $2,000 or Phil making what seemed like 3 comma days in the week. The most surprising was the unity of the group, even nipping dumb money topics in the butt. Now when you are on the other end of the convo being told that your being dumb, it might hurt your ego. However you have to remember that every idea does not have to be taken and when half a dozen people are telling you the same thing, the group tends to be right. In the moment you might feel like your getting picked on, however we are just trying to keep Mr Market from picking your pocket. As you continue to gain experience from the market you will start to notice that it becomes more of the "trades I wont take" vs the "trades I will to take."

Sector wise this week we saw REIT's and Utilities get banged up a bit (the more income focus sectors not taking the rate rises in stride), we also have Financials and Materials which have both been something range bound all year pull back very orderly which should give some nice opportunities in the week ahead. Tech and Consumer Discretionary's continue to flag near highs.

Individual name wise I will be keeping an eye on TRV 130, LLL 214, HI 53, GRFS 21.55, CE 116, XPO 116, FGEN 62, SIVB 320, CHRW 98, BLK 480 AND GWW 360.

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Macro Rotation Outlook

Cheat Sheet

Nasdaq grinding higher

S&P 500 grinding higher

Dow Jones retested highs, took profit

Mid Caps testing support

Small Caps broke support

China waiting on downtrend break

Japan lightening load

Europe range bound

Emerging Markets macro downtrend

India near support

Russia range bound, took profits

10 Year retested prior high

Bond's snooze

USD flagging

Oil breaking out

Nasdaq 8400+ 12 Month Target

Nasdaq continue to grind higher as it works its way back to retesting prior highs, trade war don't care, rate rise don't care just keeps chugging along.

SPY 300+ 12 Month Price Target

SPY is the same story, we took the correction in stride, trade war nonsense in stride and now that the market knows rates will rise to the point that kids in college even know such info that isn't news to be scared about. The markets knee jerk when things are not expected, when they know its coming, they could careless.

Dow Jones 300+ 12 Month Price Target

The Dow which was lagging for quite some time finally took out the prior highs and guess what I took my gains, sector rotation wise much better use of capital in the smaller ships.

MDY Mid Cap Stocks $400+ 12 Month Target

Mid Caps chart wise still looking the strongest, same with Small Caps however the 7th time into support can raise some concerns, I have taken all my profits in this as well, as I will continue to focus more on the sectors where the moves are a tad bit faster.

IWM Small Caps 200+ 12 Month Target

Small caps where the first to take out pre correction highs and now the first to show signs that they are breaking there support, now this in my opinion is pretty healthy, however small cap wise until a new high is taken out, I will be avoiding the chop and take that as a cue that trends do eventually break.

GXC China +$150 12 Month Target

Still waiting on this downtrend break, will look to DCA 98/100.

EWJ Japan +$85 12 Month Target

Sold some Japan this week however it was more of my higher cost DCA's for breakeven or small gains, still holding onto the good stock from down below.

VGK Europe ETF $82+ 12 Month Target

Europe still range bound, will look to buy up versus support.

VWO Emerging Markets +$58 12 Month Target

Emerging markets still like telecom, macro downtrend, 42 DCA.

INDA India +$53 12 Month Target

India back near support for the 3rd major time, could easily shake this low as it has in the past, however will continue to DCA down here on the way up above 33.

RSX Russia +$30 12 Month Target

Russia continues to want to trade in this range, after the 13% bounce off lows had to take some profits and get rid of some of the higher cost DCA's.

10 Year Treasury Note Yielding 3.06%

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 3.06% (higher = good)

Right now the 2 year Bill is yielding 2.82%

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

News - Saudi's will hold oil under $80

Chart - Don't care we'll see you at $90

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 203 DCA

VDE range bound

VIS retested high

VOX 88 DCA

VAW 132 DCA

VCR 182 DCA

VFH 70 DCA

VNQ avoiding

VDC 142 DCA

VHT hold your winners

VPU avoding

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Sensitive - sectors that have moderate correlations to overall market conditions.

VGT Tech

Wasn't a fan of the rising wedge, however can't sleep on the bull flag will DCA 203.

VDE Energy

Energy running into prior resistance at 106 while support is still holding up at 100.

VIS Industrial

Industrial's retested the prior highs and now its pulling back which is health, once it settles out we can start to DCA and pick some up for the 3rd attempt back at those highs.

VOX Telecom

Cant sleep on this macro downtrend whenever its ready to wake the sleeping giant, I will be DCA'ing 88.

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Cyclical - sectors that are more sensitive overall market conditions.

VAW Materials

Each day this week I lowered my buy stop to the high of day and by Friday I was able to lower my price by $6 per share. Will look to DCA 132, however if it wants to continue lower before the turn, fine by me.

VCR Consumer Discretionary

Consumer Discretionary's continue to flag near highs, will look to pick some up above 182.

VFH Financials

Like Materials, each day this week I was able to avoid adding to this sector with high of day buy stops, if VFH wants to continue down near 67 even better if not I have no problem picking some up through 70.

VNQ REIT

REIT's getting a little beat up and holding its first line of defense, for now.

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Defensive- sectors that tend to outperforming during sub par market conditions.

VDC Consumer Staples

Staples still settling out near this pivot high area, will buy back through that pivot when it wants to go, other than than just being patient with what I have.

VHT Healthcare

Healthcare continues to grind to new highs, this is why you want to hold your winners, they tend to go much farther than we could image.

VPU Utilities

Like REIT's, Utilities also got a bit beat up this week, which gave a nice opportunity to pick up some ED on $.50 risk.

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Sub Sector Rotation

Cheat Sheet

IBB holding

ITA holding

IBB Bio Tech

IBB starting to breakout of the macro 120 flag as it works its way back to prior highs, around this time is when we tend to over focus on the breakout trying to be perfect with stops when it just needs time, give this sector a month like ITA and let it work itself out.

ITA Aerospace & Defense

ITA took a little break this last week, causing a little impatience even on my part, however its still doing fine as it works it ways toward our target.

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The New Big Picture Set Up

The Big Picture GRFS $40+ 12 Month Target

GRFS is a pharma name and a somewhat new issue coming out in late 2016, now you know I hate cheap stocks so it takes a lot for me to want to buy anything sub $50 a shares. I have had my eye on GRFS for quite some time and have traded it once or twice. As of late we can see how $20 to $21.50 has been an area this stock has been support for quite some time while $25 its been running into seller. Let take a closer look at why this area looks to be a nice spot to sneak in.

In the $20 to $21.50 range you can see how in the get me out range how much more of a sellers market it was however it still could not break support no matter how much people tried to sell there stock, now its back in this same range again and has continue to show that line in the sand. I hate these cheap name however this is one where putting some risk on should pay off.

Big Picture Target $40+

Big Picture Entry $21.55

Stop $19.79

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The Big Picture's Updated

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.

With Materials pulling back this week CE was just not ready, however its giving us a better price to DCA into.

Big Picture Target $140+

Big Picture Entry $118.05

DCA $116.05

Stop $112.89

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.

CARA did a great job holding up this week, the Friday tickle of $24 was nice however we were looking for some fireworks, for now we have to sit tight, if your in from around $20 your chilling, if your price is a bit higher, a tighter stop near breakeven would make the most sense.

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.

Fin names got pretty beat up this week however SIVB just pulled into support, nothing to scary, will look to add above 320 when it turns.

Big Picture Target $400+

Big Picture Entry $330.05

DCA $320.05

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.

Expect some shakes here and there however for now just needs time to work itself higher.

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.