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
Trading Experts App 1/1
Trade Theory 1/15
Vermont Snowboarding Trip 1/23-27
Broad Market Outlook
Think it is somewhat ironic that we started the year racing to new highs and we are ending the year racing to new lows. Broadly speaking we are in a range bound market, meaning that we need to look for opportunities when things look bleak and look to sell when everyone is cheer leading (case in point - us selling post G20 meeting which has been a short term high since).
Right now the overall cue is less is more. However when everything looks like shit, there still tends to be some deals out there. Globally China (GXC) and Emerging Markets (VWO) are basing out very well while Russia (RSX) is setting up though $21 (annual dividend coming soon - expect the gap down).
We had our first scare of an inverted yield curve this month (shorter term rates higher than longer term rates) which tends to be a bearish sign down the road. Couple that with the Small Caps (IWM) leading us lower. It has hard to find much good out there.
In our backyard we have the Fin names heading back to major support that has held for 2 plus years (58 level), while Consumer Discretionary (VCR) are heading back to 152 level (which has held up all year - should flush that level) along with Healthcare (VHT) heading back to 162 level (should flush as well).
With 2 weeks left in the year, this is the time to start recapping 2018, what you did well, what you did poorly, what you will focus more on in 2019 and what you will focus less on. With the year coming to a close from a retirement standpoint you want to make sure you maxed out your IRA's ($5,500 for this year) and got as much into your 401k's as possible for the year ($18,500).
From a trading stand point, it might feel like the market is going to be like this forever (it won't). You just have to remember there are good days and bad days, good weeks and bad weeks. The more you say the market is shitty and complain the more shit you will see. The more you can focus on finding opportunities the more you will find. This year was full of lessons you just have to take notice and adapt.
Stock wise I will continue to be focusing on the large cap names such as UNH 272, MMM 204, AAPL 175, MSFT 112, CSCO 46, HD 176, XOM 77, WM 94, UTX 120 and INTC 49.
Macro Rotation Outlook
Nasdaq correction low retest in the cards
S&P 500 correction low retest in the cards
Dow Jones same pattern
Mid Caps lower prices in store
Small Caps lower prices in store
China 92 DCA
Emerging Markets 40 DCA
India wild west (avoid)
Russia range bound 21 level (dividend payout soon)
10 Year not inverted (good)
Bond small up tick
USD near highs
Oil settling out
The chop continues with the level of enthusiasm about the market at an all time low for most. Most are having a hard time grasping this new range bound market. Next week we should expect to see 6400 and 6200 retested and in time we should be keeping an eye on the 6900 level to the upside.
That 280 sell in the SPY looking so good right now, for now seems the SPY has its sights on the 250ish area to shake the prior correction low, when that happens expect the level of world ending
Same year, two corrections, identical trading, should be expecting some flush down through 232 in time and that's when we should be started to look to buy up when everyone is boo hoo'ing that the market isn't doing exactly what they want it to do. We started 2018 at highs, if we end the year at lows, sets us up for a great 2019.
MDY Mid Cap Stocks
Will be keeping an eye on the 300 level to hold, next add will be up through 324 in time.
IWM Small Caps
Small caps have been leading us and they along with the mid caps are showing us lower prices are in store, the measured move of this breakdown is into the mid 130s. Next DCA on the way up will be through 144.
China is starting to base out after breaking the down trending streak that lasted for the better half of 2018. Now with it started to base, I will continue to buy 92 until it finally breaks out of this base.
We will most likely be seeing lower prices in EWJ over the short term, macro 20+ year level is 66 going back to 1996. That is going to be a great one however might be a year or so before that is ready.
VGK Europe ETF
Europe is still in the overall downtrend and will need some time and a shakeout before it can start to base.
VWO Emerging Markets
Similar to China, the Emerging Markets are starting to poke its head out of the down trend as it starts to base under $40. Like China, we like the Emerging Markets as well for some added overseas exposure.
If you want to complain about our markets, just take a peak at India, which dropped 17% during our correction, snapped back around 80% of the move only to catch back to back up and down 3%+ gaps. It might look like the weather is bad here, however it is often worst elsewhere.
With all the drama in the US, Putin is just flagging nice and tight under this 21 however with an annual dividend of 4.5% being paid out soon, expect that dividend gap down.
10 Year Treasury Note Yielding 2.89%
We started to get the first warning sign of an inverted yield curve (shorter term rates yielding more than longer term rates). Most people panic at this which is something to take note of. For now the 10 year is still yielding more than the 2 year so we are still good.
10 year Treasury Note 2.89% (higher = good)
2 year Treasury Note 2.73%
BND Bond Market
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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If you would like to do us a Small Favor by leaving us a review, there will be a surprise at your doorstep before the next Big Picture!
- 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 180 DCA
VDE 86 DCA
VIS 120 support (eye on)
VOX 80 DCA
VAW 114 DCA
VCR 152 major support (5th attempt should break)
VFH 52 major support
VNQ range bound
VDC lower highs, lower lows
VHT 162 line in the sand (should break)
VPU new highs, no surprise
Sensitive - sectors that have moderate correlations to overall market conditions.
We did a great job selling into the gap up and started to pick some back up, the next DCA is up through 180.
We are seeing prices in Energy that we have not seen since 2017, will DCA on the way up through 86.
Next area of support is this 120 area, on the way up will look to add above 130.
Vox still in this macro downtrend, 80 is a short term spot to DCA, bigger picture around is a break of 84.
Cyclical - sectors that are more sensitive overall market conditions.
VAW just started to tickle the double bottom break, lower prices seem in the cards, however it is also giving us a tight risk add up through 114 when it wants to turn.
VCR Consumer Discretionary
Discretionary have held this 152 level all year, 5th time to support smells like a breakdown.
58 in VFH has been a major level of support going back to late 2016, we should expect some buyers to come in to defend that area, if it flushes that area, we should keep our eyes on the add back up through it.
REIT's were quite strong lately as most went yield hunting after ditching the momo and tech names, still stuck in this 9 point range not really worth the add a few dollars off highs.
Defensive- sectors that tend to outperforming during sub par market conditions.
VDC Consumer Staples
Started to notice the writing on the wall after the lower high and lower low in the staples, still had some great stock and took some more off for gains. Will be avoiding for now.
162 held up like a champ at the end of October however now that we are heading right back into that area, hard to expect the buyers to still be as strong.
When everyone is scared where do they go?
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.____________________________________________________________________
Sub Sector Rotation
IBB 104 DCA
IBB Bio Tech
From a trading standpoint we did very well with IBB, buying up off support and selling into resistance, now we can easily buy back 104 when IBB wants to play.
ITA Aerospace & Defense
Still in this lower high lower low environment, an avoid for now.
The New Big Picture Set Up
The Big Picture INTC $57+ 12 Month Target
For how rocky the markets have been, INTC is tightly flagging in this $3 range, Intel is the lower beta tech, old dog, however when the new dogs are getting sent to the pound, someones the old companion is just what we need. Have been trading in and around this range to get a feel for it. Eventually this 49 level should push though to retest highs and works itself down to the road to take that out (3rd times a charm).
Big Picture Target $57+
Big Picture Entry $49.05
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 have now take this trade 3 times and made money in each trade, as CSCO pulls back into this range, will be keeping an eye on adding up through 46 in time.
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.
We've gotten two nice trades in HD trading the range even with higher lowers, for now will be keeping an eye on 176 for an add.
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 at the East Coast snowboarding trip in January!
Trading Experts Atlanta Racing Trip
Was great to catch up with Rob and Mr Moon down in ATL this past weekend. Racing these Porsche's on a private track helped reinforced how much of dumb money I have been all these years whipping my Aston around.
In ATL 100% legal, in NJ that's an easy 3-5.
Rob "I'm going to leave the GT3 with you, take care of my baby"
I got you Rob!
Trading Experts East Coast Snowboarding Trip
Date January 23rd to 27th (Wednesday to Sunday)
Airline Ticket RUT
Cost $1098 by Dec 30th, $1198 by Jan 23rd
This year we have decided to descend to Vermont for a week long trip of snowboarding, trading and a few other surprises! We have rented a ski on, ski off cabin from January 23rd to the 27th (Wed to Sun). A 4 day pass will be included, if you plan on attending let me know! Also if you need a snowboard or a set up I have a dozen plus Burton snowboards in all sizes.
If you have your own lift tickets or can only make it a few days, let me know for alternative pricing.
So far on this trip it will be Shake, myself, Kriss, Colin Rafferty, Darrin, Sam and whispers that Nick Aza, Gina and Carl might join as well. There is still room for 4 more Alpha Members to attend!
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