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
Broad Market Outlook
After a rough month of October the market finally started to settle out and even turn a bit thanks in part to some stellar earnings. Now we have to remember that we are in a range bound market and most likely will be in for the time being. Where we are paid to buy up off support and look to sell into the pops/resistance levels that we are so use to buying.
The last correction lasted two week and took over seven months to tick new highs. As much as we want to V bottom right back to highs the market unfortunately is not Santa. 260 in the SPY is the new line in the sand and we can just as easily see that level tested at any time as the market continue to chop around and find its footing. With names like BA dropping $40 points only to be right back up $40 points two days later, there is some money to be made for the active trader. There are sneak buy backs galore as virtually every chart other than BA or AAPL have pulled back into prices that we have not seen in quite some time.
Each week as a group it is great to see the consistent improvement that each of you are making to improve as traders and investors. During the rough times are when you learn the most about your abilities and what can use some improving.
Sector wise after a sharp bounce off lows last week ending the week pull back it has hard to expect much follow through to the upside as the market needs to find its footing. I will be much more defensive and focusing on the larger cap names that tend to be less effected by any overall weakness in the market.
Few names I will be keeping an eye on are CSCO 46, TRV 128, HON 148 and LOW 100.
Macro Rotation Outlook
Nasdaq below 6900 expect to retest lows, above 7100 all good
S&P 500 260 major line in the sand
Dow Jones 240 major line in the sand
Mid Caps 320 major line in the sand
Small Caps 144 major line in the sand
China lower lows, lower highs (avoiding)
Japan lower lows, lower highs (avoiding)
Europe lower lows, lower highs (avoiding)
Emerging Markets lower lows, lower highs (avoiding)
India retesting prior pivot
Russia range bound
10 Year breaking out
Bond's new lows
USD retesting prior pivot high
Oil heading towards prior support
Nasdaq 8400+ 12 Month Target
From peak to bottom we saw how quickly an 8 month grind can get wiped out in a few short weeks. With the Nasdaq pulling back 14% bigger picture wise this was great for the market to continue to trade in this range and set up for the next flag. Where for the most part of the year we were paid to buy the break, now we need to shift gears and focus to find opportunities after the pull in's.
SPY 300+ 12 Month Price Target
Just like the last correction we spent a mind blowing hour in correction territory, with no surprise of that same time being when most wanted to press short. Just like the last correction as much as want to V bottom right back to highs, that usually is not the case. The range bound year that we are in is great for us longer term as we did the same from 2015-2017. During this time we need to focus on selling the rips and buying after the pull in's.
Dow Jones 300+ 12 Month Price Target
The top 30 largest companies in the US pulled back the least as most tend to ditch the leaders last. We saw some weakness in leaders like BA drop 7% in one day only for them to be right back to highs two days later. Sometimes the less you watch your positions the better you can avoid the noise.
MDY Mid Cap Stocks $400+ 12 Month Target
Like Nasdaq, the Mid caps also pulled back 14% off highs and retested the prior low and held which was a great sign to see. Sold some of my adds in the mid and small caps much quicker than I would normally since I am expecting to see those prices again very soon.
IWM Small Caps 200+ 12 Month Target
Small caps which has been showing us whats in store pulled back the most with a 17% drop off highs. I bought the first bounce than added the second, however took them off as it seems these "h" pattern are not done yet. Lunch money gains, yet gains nonetheless.
GXC China +$150 12 Month Target
China is still in this down trending channel, once we can see a change from these lower lows and lower highs, I will start to DCA.
EWJ Japan +$85 12 Month Target
Japan is starting to form a nice wide range between $53 to $61, for now will let it start to form a pattern before adding.
VGK Europe ETF $82+ 12 Month Target
Europe like China, once we can see a change from lower lows and lower highs, will start to pick some more up.
VWO Emerging Markets +$58 12 Month Target
Just like Europe and China, once the emerging markets can get out of these lower lows and lower highs we can look to add.
INDA India +$53 12 Month Target
After avoiding the 20% in India, we got some good stock off lows and booked some as it retest a prior level of resistance.
RSX Russia +$30 12 Month Target
Russia is still range bound however it is getting tighter.
10 Year Treasury Note Yielding 3.21%
As rates continue to rise we will continue to see the 10 year inch higher which crushes bond prices as you will see below the bond market just put in a new low as the 10 year is putting in a new high.
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 3.21% (higher = good)
Right now the 2 year Bill is yielding 2.91%
BND Bond Market
New lows tend to be followed by new lows.
The USD has been having a hard time breaking this area, remember weak dollar good for us.
Oil coming back into the $70 area of support, we should expect to see that area get tested/flush.
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.
- 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.
VGT showing some red flags
VDE started to nibble
VIS near gap
VOX broke major support
VAW starting to turn
VCR fast bounce off lows
VFH near support
VNQ 'h" around the corner
VHT lower highs, lower lows
Sensitive - sectors that have moderate correlations to overall market conditions.
Tech is starting to flirt and break a major trend line, as much as we love the leader, they can get knocked off the top spot and most think that it will never happen. Tech is starting to show us lower lows and lower highs. Below 175 look out.
Started to nibble back into energy after avoiding it all year as it bounced around in a 6% range not doing much.
Pretty hard V bottom off lows so far we can hold 126 as the new line in the sand.
Telecom h'ed down through its major area of support as the continue downtrend stays the course.
Cyclical - sectors that are more sensitive overall market conditions.
Materials was one of the sectors that I started to DCA too soon in during the pull back however as of last the last two adds were the real winners so far. Still not out of the woods however we are starting to see a better path than the one we were on.
VCR Consumer Discretionary
Discretionary's also have a pretty sharp bounce off lows however we are still seeing lower lows and lower highs. Once that trend can change should be good to start adding.
Financials we have avoiding for a bit as they continue to h over, now it will be time to tell if the current low can hold up into any weakness next week.
Smell an "h" in the oven.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
When the market gets rocky, people are still going to buy toilet paper and tooth brushes, as staples continue to flag near this major pivot. It is an area we want to be in for as it breaks however buying the breakout tends to be a low paying play with the major sectors. We need to find a spot on any pull in to pick some up.
Lower highs and lower lows, the downtrend continues.
122 is a major area of resistance however we want to be looking more for spots to add near support in this more often than not boring sector.
Longer Term Financial Planning
For most the thought of planning for retirement is almost a joke however having a plan in place to keep you on the road with the proper goals can help make the path toward your first million or tenth much more concrete, realistic and attainable.
I have being doing this already for quite a few Alpha members (Gina, Carl, Adam, Yousef, Valentino, Rich, Sir Wil) and would be more than willing to put a plan together for you as well. If you would simply DM me and we will get a plan put together.
For all the members who are maxing out there retirement accounts here are the new limits for 2019!
2019 IRA max contribution $6,000
2019 Roth IRA AGI Limit $130,000 (no income limit on Roth 401k)
2019 401k max contribution $19,000
Sub Sector Rotation
IBB above $100 all good
ITA 182 line in the sand
IBB Bio Tech
Grabbed a nice add on the way up and $100 continues to be a strong line in the sand, however if we break $100 look out below.
ITA Aerospace & Defense
Hard V bottom off lows with it right back in the middle of its $20 range.
The New Big Picture Set Up
The Big Picture CSCO $60+ 12 Month Target
We took CSCO back in August and you might remember how slow this name moves for a tech name however when the market is rip and dipping hundreds of points a day hanging with your grandfather tends to be just what the doctor prescribed. We can see how this $46 has been a clear line of resistance for CSCO, going forward I will continue to DCA above $46.
Big Picture Target $60+
Big Picture Entry $46.05
The Big Picture's Updated
The Big Picture HD $250+ 12 Month Target
Down the road that 3rd times a charm through $208 looks great however we don't want to be buying just than, as HD pulls back into a prior area of support I will be looking to DCA above the $180 area in time.
With HD back into this area of support, continued to add if it wants to V bottom off lows so be it and if it wants to hang around in this range a little while longer we have no problem with that either.
Big Picture Target $250+
Big Picture Entry $208.05
The Big Picture BA $420+ 12 Month Target
Scanning thousands of charts, BA continues to be the only name that for the most part has not gotten too effected by the overall weakness in the markets. It is continuing to set up through this 370 level. Now it is not A+ since it has already taken out the level, it is giving us a great chance for a sneaky buy back when we usually forget about the name after the initial move.
BA continues to show us how nice this bull flag is however when it got to $370 on Friday it was a gift to take some off after the $40 bounce it had this week. Now it can continue to pull in and settle out and than when it really wants to try that level again, we will be there ready to buy.
Big Picture Target $420+
Big Picture Entry $370.05
Trading Experts NYC Meet Up
Awesome to see such a big turn out last night with over 20 members showing up throughout the night bringing along wife's, girlfriends and friends. Great catching up with everyone and we can't wait to see you guys again on the East Coast snowboarding trip in January!
Trading Experts East Coast Snowboarding Trip
Date January 23rd to 27th