The Big Picture

We are back! After 7 months of a slow grind to new highs, we are finally getting a shake up in the market that we all needed. Now for most this is your second (mini) correction and it was great to hear from so many of you who were pretty much all cash (Valentino, Darrin and Nick Neef are a few ringing a bell). I say mini because the Nasdaq spend a mind blowing 5 minutes in correction territory, the SPY and DOW at worst were only down 7% off All Time Highs, and only the Small and Mid caps actually made it into correction territories, we were given the red flags two weeks ago. Now during this small period of time (last correction top to bottom was 7 days and only an hour was actually spent in correction territory) and what happened last week can real fuck up months and years of hard work, I am not talking about PnL's or charts, I am talking about what we do. Throw a little red on the boards for a few days and most want to get there bear coat on and dusting off those option's for dummies book they never read before. Or throwing around lingo that when asked what the definition of it is, they shrug there shoulders. Easy market, hard market, slow market, fast market, choppy or boring market, keep shit simple. Leave the theories and other non sense elsewhere.

Ask yourself during the last correction, was it smart to short when the market was down 7-10%?     

No, it was actually the dumbest thing humanly possible and those who got short when everyone and there mothers wanted to get short, got there faces ripped out. So why is this time any different?

So lets try this question again, is it smart to short now when the market is down 7%?

Now I still feel and have said this before that we could easily retest new lows however either move back through highs or to new lows will be a choppy one to fuck most people and push them away from the market only for them to come back and chase it higher. If you are now going to start flip flopping daily between buying and shorting stocks, I wish you good luck. If you do feel that you now need to be a shorting hero just know who warned you and just flip the chart upside. This is the first time all year that bases have really turned into bear flags. If you are looking to short a leader at highs, just get the shovel out. You want to short, find losers that are hugging near lows that once those lows get taken out everyone long is fucked. Trying to short a name where the only people fucked is anyone who got long in the last 12 hours is a fools errand.

The action on Friday was very telling, and I try to avoid putting much weight into such small time frames however the gap up to almost prior days highs made it extremely improbably for any real follow through, scanning every S&P, Nasdaq and Dow name most were doji's that eventually faded. The buyers quite frankly didn't have the balls to step in and turn the tide. Will this week be any different is anyone's guess. There is soo much out there right now that just needs some time to settle out and set up. Sectors and charts who are giving us prices we have not seen in months. Instead of wasting your time finding a 5 minute reversal in the SPY, look at individual names, there's a lot of deals out there.

Sector wise across the board we saw mostly all sectors pull in anywhere from 5-13% of highs, I am not here trying to catch lows, however with cash on the side lines I will continue to add to this sectors when they turn. Each day last week I was moving buy stops down from the high of days and eventually picked up VAW at $122 on Friday when on Monday I had an order in above $130, could VAW head lower? Sure however with major markets and sectors we tend to get paid much more buying when the market is scared. Stock wise this tends to be much harder as a stock can easily get cut in half in a month while a major sector like Materials that usually is not in the cards.

Stocks that I will be keeping an eye on LOXO 170, BIIB 350, NTLA 25, LLL 200, XPO 104, CE 102, CARA 20, ABBV 96, APY 46, HI 51, BA 370, MMM 204, CSCO 46, CAT 145, INTC 46, KO 45 and VZ 54.

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.

4 months to rise to new highs, 4 days to wipe it all out, stand wall street trading. When you are not caught holding the bag and can get back in these are the deals you should be dreaming of.
Telecom has been chocking me out all year, however just when we were about to tap (jk) they bounced right back above the low that held all year. Still in this macro down trend.

Materials in correction territory after failing to break that 138 pivot, started to add on Friday and will continue to add when it turns.
All these support breaks look so easy now however in the moment that were on no ones radar, were back into a support area and could still expect to see lower prices however after a pull back like the one the last week, would not be too surprised if we get a bounce first.

IBB Bio Tech 

 IBB in correction territory and back into what was a solid range, still a bit too early however this is a level to keep an eye on.

 Now was that a close one, took this off for a 5% gain and right back to where we were buying in the end of August, this is a prime example of buying an ETF, we held for a month, we were always green, we collected a dividend payout and made 5%, now in a stock you could have made that gain in a day (or lost it) in an ETF they tend to move much slower.