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
Atlanta Racing Trip 12/6-9
Trading Experts App 1/1
Trade Theory 1/15
Vermont Snowboarding Trip 1/23-27
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Broad Market Outlook
After what felt like a rough two months with a correction and overall choppy environment it seems the worst part of the storm is behind us. We saw this weeks momentum swing set up starting to work again coupled with the large cap leaders showing there muscles.
Now we are far from out of the woods, and we need to continue to embrace and exploit this range bound market. The SPY's overall range is 30 points or a 10% range from peak to lows and more recently in a 20 point range between 260 to 280. As we get closer towards 280 is when we want to start shifting towards our defense game (keeping tight stops).
This week there were a few 1-1 convos that I had with Alpha members who were getting great stock like HD $172 with there 1st thought was to sell some stock a mere 1% higher to lock in profits. After two months of most trades failing, we can understand the feeling to want to put some points on the board. Yet when you look at the bigger picture months from now you will be wondering what the fuck were you thinking. The overall complaint that I hear is the issue with letting a position settle (T+2) however stocks take weeks, months and even years for real gains to be made, shit even our best short term swing setups take around 3 days for there moves to get extended. If you have a problem holding a stock for only 3 days, in the long run your odds of success is greatly stacked against you. The stock PG recently took 6 months to go from 52 week lows to 52 week highs or a 30% gain. If you are picking up leaders like HD, AAPL, BA 10,20,30% off highs and looking to sell them 1% higher than your price, you will have a very hard time making real money. Put the water pistols away, and let the stocks do the heavy lifting.
Market wise there are great deals setting up overseas in China, Europe, the Emerging Markets and Russia. While sector wise most have had solid bounces this past week so it is hard to press most of them other than Energy and Financials that still are showing spots to get in.
Stocks that I will be keeping an eye on this week CMA 80, HI 45, CARA 19, TRV 132, TIF 96, CDNS 47, HPQ 24, OFIX 62, DWDP 58, AAPL 184.
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Macro Rotation Outlook
Cheat Sheet
Nasdaq above 6800 is a good sign, look to take profits near 7200
S&P 500 range 260 to 280
Dow Jones 252 stop
Mid Caps solid double bottom, 348 resistance
Small Caps 145 to 158 range
China 93 DCA
Japan above 53 fair game
Europe 52 DCA
Emerging Markets 40 DCA
India locked in gains
Russia 21 DCA
10 Year pulled back to prior breakout level
Bond's lows
USD new highs
Oil bottom seems near
Nasdaq
Range bound market continues (6400-7200) as long as we stay above 6800 we should see a retest of 7200 in time however expect round trippers to create resistance in that area.
SPY
The SPY is also in a 20 point range where it pays to buy up near support not trying to buy the break of resistance. 280 in time will be the level we will want to see break however unlike a stock it tends to take a bit more than 3rd times a charm to do the trick. Above 260 we are chilling.
Dow Jones
Same pattern repeating itself, as you have noticed recently I have been focusing heavily on the large cap blue chip names that people are less likely to ditch during times of uncertainly. With that being said as the top 30 in a bucket, I am keeping my stop tight vs 252 as it runs into overhead resistance.
MDY Mid Cap Stocks
MDY put together a beautiful retest of lows forming a nice double bottom, at the moment we were not sure it would hold. For it is and we can see a defined area of resistance 348 that we will want to keep an eye on. As long as we stay above 320 we are in great shape and any chance to DCA after a pull in, I will look to add more. In no rush to buy 348.
IWM Small Caps
The small caps have been up in front pacing the race and also starting to form a nice range with defined levels. A few weeks ago it was hard to gauge where the market was going, after some time and defined levels of support and resistance see how easier it is to be willing to put risk on. The new range is between 145 to 158, its a tall ask to want to buy 158 even if its a clear as day level. Like the other major sectors when everyone is bitching and moaning when this markets are near support tends to be the best risk reward buys.
GXC China
The downtrend seems to be shifting gears into forming a base in China which is great to see, unlike a stock when we expect a downtrend break to snap back higher, when it comes to an entire country, it needs time to settle out. We could still just as easily test new lows and still be fine regarding this new base that is in the process of forming. Can start to DCA above $93 however be aware this base is a $10 range.
EWJ Japan
Japan is in a much tighter range, one could even say a bear flag from 53 to 56. Started to get back into Japan after selling out before the correction. Anything above 53 is fair game, not in the biggest rush to buy 56 as its only the 2nd retest of that area.
VGK Europe ETF
Europe is in an even tighter range than Japan is in, in a much larger pattern. Above $52 vs the $50 out is a tight risk DCA
VWO Emerging Markets
Similiar to China, the Emerging Markets are starting to base, prior you can see the lower highs and lower lows. As of the last two months it has started to shift gears and form new pivot lows while knocking on a solid inflection point. Still in a 4 point range from 36 to 40 however I will start to DCA above 40.
INDA India
We had a nice trade in INDA prior to the most recent correction that sent India into almost bear market territory after dropping 17% off highs. We DCA's vs support, clearly was wrong than waiting and got great stock off lows. After a nice bounce where we took some gains, we were able to lock in a small profit in the first DCA and than lock in around 11% on the great buy. Now will cash on deck we can put these funds to work in other sectors.
RSX Russia
Russia is starting to get tighter in this range and with a 5% dividend yield, above 21 I will look to DCA.
10 Year Treasury Note Yielding 3.05%
10 year coming back to retest the prior breakout level.
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.
BND Bond Market
New lows tend to be followed by new lows.
USD
OIL
Seems we are starting to get near the max pain of this 30% pull back off highs. What is funny is that most expect oil prices to rise in the winter as people spend more heating there homes. Mr Market put up both middle fingers to that standard assumption.
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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 holding
VDE 92 DCA
VIS holding
VOX holding
VAW 122 DCA
VCR holding
VFH 68 DCA
VNQ why you dont puke during corrections, almost back to highs
VDC new line in the sand 140
VHT 3rd times a charm
VPU at resistance
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Sensitive - sectors that have moderate correlations to overall market conditions.
VGT Tech
We got a nice entry up off support this week so we can see back and see how the 184 resistance level plays out.
VDE Energy
Will Oil looking to be near the tail end of the bear market pull back it had, will be looking to DCA above 92.
VIS Industrial
Seems a retest of the prior pivot high 138 is in the cards, no DCA yet.
VOX Telecom
Still in this macro downtrend, a lesson in patience.
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Cyclical - sectors that are more sensitive overall market conditions.
VAW Materials
122 is showing us a spot to DCA.
VCR Consumer Discretionary
Running up near resistance hard to press a DCA up here.
VFH Financials
68 DCA
VNQ REIT
Working its way back to retesting the prior highs.
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Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
We have a new line in the sand anything above 140 is fair game.
VHT Healthcare
3rd times a charm as it works its back to prior highs. Great example of why you do not puke during a correction.
VPU Utilities
Bull flagging at highs, still a red flag.
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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 already and we would be more than happy to put a plan together for you as well.
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 401k max contribution $19,000 (no income limit on Roth 401k)
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Sub Sector Rotation
Cheat Sheet
IBB holding
ITA waiting for a set up
IBB Bio Tech
Had some solid DCA's off of support, the next major test is if it can take out the prior pivot high.
ITA Aerospace & Defense
ITA is still in a wide range, holding off on any adds for now.
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The New Big Picture Set Up
The Big Picture TIF $140 + 12 Month Target
A year ago we were licking our lips to buy $95 in TIF now most want to run and hide, sure short term they missed on earning. That happens from time to time, however the chart is still in tact. After some settling out above $95 I will start to DCA in this sneaky buy back.
Big Picture Target $140+
Big Picture Entry $95.05
Stop $83.89
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The Big Picture's Updated
The Big Picture HPQ $31 + 12 Month Target
HPQ has been a name we recently took through $25 and $26 however it was just not ready, we made some lunch money however nothing to lose sleep over. This has been a pattern that has been in the works since before the financial crisis. This one is going to take some time however when it does clear this area and the prior highs, we could expect a similar move to MSFT, MSFT took 20 years to take out the doc com highs, after it did, it took less than a year to double.
Still needs time however $24 seems the spot to start picking some shares up.
Big Picture Target $31+
Big Picture Entry $24.05
Stop $21.89
The Big Picture AAPL $300+ 12 Month Target
After pulling back right into a prior resistance level Apple is giving us a change to add back to a name that we have not traded in quite some time. We are still holding onto our 165 stock and have no problem looking to add some 30 points higher.
We had two nice adds in Apple near what for now seems to be the low. Can it head lower? Of course, in the mean time if it can start to form a worth while add, we have no problem adding.
Big Picture Target $300+
Big Picture Entry $183.05
Stop $160.89
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.
After a sharp sell off to shake the prior lows, we saw BA snap back $40 point in a few days, Carl took advantage and got some great stock near $300.Going to be a hard to add after the bounce it had until it can settle out and flag.
Big Picture Target $420+
Big Picture Entry $370.05/$372.05
Stop $298.89
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 got a nice entry back through $46 again after taking this trade twice already, for now keeping the breakeven stop.
Big Picture Target $60+
Big Picture Entry $46.05
Stop $45.89
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.
We got great stock on the way up off support, next area to keep an eye on would be the retest of the prior pivot high. If you are patient and can lock this buy in the shelf for 3 to 6 months we should be see it battle with prior highs for 3rd times a charm.
Big Picture Target $250+
Big Picture Entry $208.05
DCA 172.05
Stop $166.45
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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 in Atlanta in December and the East Coast snowboarding trip in January!
Trading Experts East Coast Snowboarding Trip
Date January 23rd to 27th (Wednesday to Sunday)
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