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
Trade Theory 11/31
Trading Experts App 12/31
Broad Market Outlook
With the correction still fresh in the back of your minds, you might remember how many people wanted to start shorting just a mere 10 days ago when we were at lows. Then later into this week after a strong bounce off lows running into resistance most wanted to press long. For most on Thursday and Friday, we did a great job shifting gears into a more defensive mode.
Bottoms, like tops, are a process. As much as we want the V bottom, we are rarely given what we want. The last correction showed us that clear as day, it took 8 months to take out new highs, yet we are still expecting "this time to be different." Given how much we have bounced off lows and the recent weaknesses that we saw starting on Thursday, it would be a tall ask to expect much upside in the week ahead in the broad markets.
With the Mid Terms behind us, there's really no major news to shake up the market, until they want to bring up the trade war story for the 9,000th time. I raised quite a bit of cash in the DOW 30 names this week after such a strong bounce it was only a mere 6 points from all time highs while the rest of the major indexes were still trapped near or under there prior pivot highs.
For the active trader there was some real bounces these past two weeks in some major names however if you are looking to buy a name that just ripped $20 in a week, might want to rethink the game plan.
Stock wise I will be away for most of the week until Thursday however will be keeping an eye on TSN 64, WFC 55, CDNS 47, CARA 21, BA 370, KSU 104, JBHT 112, BMRN 100 and GWPH 150.
Macro Rotation Outlook
Nasdaq forming new range
S&P 500 forming new range
Dow Jones sharp bounce
Mid Caps range bound
Small Caps range bound
Emerging Markets avoiding
Russia range bound
10 Year breaking out
Bond's new lows
USD retesting prior pivot high
Oil at major support
Nasdaq 8400+ 12 Month Target
We are starting to see a new range forming, now as we mentioned on Thursday after the sharp run up off lows, it was time to start playing some defense, as much as we want a V bottom, they tend to want to base out and create more defined levels that just sprinting back to highs.
SPY 300+ 12 Month Price Target
Similar story, two weeks ago most people wanted to short as we dropped into support and now that we are running into resistance most want to be long. Remember that resistance in a stock is much easier to break that the collective 500 stocks in the S&P.
Dow Jones 300+ 12 Month Price Target
As we have mentioned people tend to ditch the leaders last and its not really much of a surprise that the top 30 companies caught such a strong bounce, myself person was taking profits in CSCO, HD, TRV, MCD and a few other Dow 30 names after they had some serious bounces off lows.
MDY Mid Cap Stocks $400+ 12 Month Target
Sold a few points early and as much as I wanted to hold before I had "great" stock, in this market, great stock today can become shit stock tomorrow. Take the cheese and move on.
IWM Small Caps 200+ 12 Month Target
Ran into a prior pivot high that was not able to be broken which is fine, we know we are in a range bound market and need to continue to buy up off of support and sell into the prior pivots. Same as MDY sold a few points earlier however now can get back in when the time is right.
GXC China +$150 12 Month Target
Lower lows, lower highs, avoiding for now.
EWJ Japan +$85 12 Month Target
Bounce right into prior support now turning into resistance, same as China avoiding for a bit.
VGK Europe ETF $82+ 12 Month Target
Still not able to take out the prior pivot high and still in this major down trending channel, avoiding.
VWO Emerging Markets +$58 12 Month Target
Much cleaner down trending channel however until it can break that upper range of resistance, going to be avoiding as well.
INDA India +$53 12 Month Target
After the 17% drop in India that we avoided and caught stock right off the low took the gains on the bounce. Will be avoiding as well.
RSX Russia +$30 12 Month Target
Still range bound, we shall see if the prior pivot low holds, would not be all too surprised if it does not, none the less, avoiding until we can get a solid entry through highs which should be in the distant future.
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.
As we mentioned last week that we should be expecting a flush of $70 it was quite the quiet flush, this tends to be the low risk spot to add on a turn in the oil names.
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 range bound
VDE in value area
VIS upper end of recent range
VOX macro downtrend
VAW took profits into bounce
VCR upper end of recent range
VFH running into overhead resistance
VNQ running into prior pivot high
VDC strong, eyes on prior highs
VHT $14 range, less than a $1 from top of $14 range
VPU bull flagging
Sensitive - sectors that have moderate correlations to overall market conditions.
The uptrend is starting to forming into a base or head and shoulders that time will decide. As much as we love tech, a changing of the guard seems to be more likely. We will let the price action show us, above 175 we are still in good shape.
After almost a year of avoiding this sector, started to nibble as Oil came into a major area of support. By all means could still see lower prices however this has been a value area in the past.
Nice and wide $13 point range in VIS forming, hard to be looking to buy up here.
As we are seeing in the overseas markets, VOX is showing us what tends to follow, lower highs and lower lows. Still looking to avoid adding until a break of the upper range of resistance.
Cyclical - sectors that are more sensitive overall market conditions.
We got some sick prices in VAW and caught a nice bounce, as much as I wanted to really sit with those, in this range bound market, taking off profits into the bounces keeps cash in our pockets. Of the last 4 DCA, 3 were able to be sold for profit while I still hold some of the higher cost position. Just had to buy when most wanted to short and take profits when most wanted to buy.
VCR Consumer Discretionary
Nice wide range in VCR however asking for a lot to be buying up here after the bounce it had.
Fin names had a nice bounce into what was prior support that we are seeing just might be turning into resistance. Still have some bank positions, ETF wise not looking to add up here.
REIT's are liking watching paint dry and for good reason, we saw them put in a nice higher low for now which down the road should help set it up for the macro 86 level that was beaten down after the tax cuts last year.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Locked in some gains in VDC this week to free up some cash to put to work in other sectors.
Healthcare with a sharp break of the recent downtrend as it runs right into the prior pivot high. They really help the line at 162, however trying to buy 175 looks like a fools errand.
Utilities flagging, we should eventually see higher prices and new 52 week highs in the distant future.
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.
We have being doing this already for quite a few Alpha members (Gina, Carl, Adam, Yousef, Valentino, Rich, Sir Wil) and we 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)
2019 401k max contribution $19,000 (no income limit on Roth 401k)
Sub Sector Rotation
IBB upper end of recent range
ITA upper end of recent range
IBB Bio Tech
Nice solid range starting to form in the bio's, need's time.
ITA Aerospace & Defense
The Defense names had a sharp bounce off lows, RTN LMT GD all up $20 to $30 points off lows, I sold the rest of my GD into this bounce as a roll over seems like its in the cards.
The New Big Picture Set Up
The Big Picture BA $420+ 12 Month Target
Throughout this correction and bounce, BA had 1 shit day and 2 days later recouped the entire days move that was lost. With this name flagging at highs in a major flag, and sneaky buy back, there are so many good things working for it. Can't drop the ball on this one.
Big Picture Target $420+
Big Picture Entry $370.05/$372.05
The Big Picture's Updated
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.
We know how slow the old tech names can move, so took the gains and have no problem on getting back in.
Big Picture Target $60+
Big Picture Entry $46.05
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.
HD like the hand full of other DOW 30 names that had nice bounces this week, to not lock some in seemed quite foolish as the vertical moves are often reversed.
Big Picture Target $250+
Big Picture Entry $208.05
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 (Wednesday to Sunday)