The Big Picture Outline
- Broad Market Outlook
- Macro Rotation
- Sector Rotation
- Sub Sector Rotation
- New Big Picture Idea
- Updated Big Picture Idea's
New Business
How to Swing with Sharks will be released on July 1st!
Broad Market Outlook
This is a stock pickers market, which is great news for us and the proof is in the pudding. The market is barely up single digits this year, yet how is it possible that members are up 75% this year, or shit even 20%+ in a week because its a stock pickers market.
This is why you want to focus on the charts and let them do the talking, dont let what the SPY is doing on a 15 min trip you up from buying that A+ breakout. Now we also cannot blindly forget about major macro patterns. If you look at the major index's the small caps are showing us what the bigger guys (mid and large caps) can do in time and not in time as in this week or next, in time as in a few months down the line. As you look at charts of the IWM, MDY, SPY and NDX, you should see the painting I am try to paint and if you are still scratching your head, simply ask.
Sector wise we are starting to see how the darlings can quickly become the duds while the geeks can turn into jocks over night. Oil and Energy which was leading us these past few months has started to roll while we have seen Telecom and Consumer Staples finally showing some signs of life, while the tag team Bios and Pharma's have been the spots to get paid. Plenty of rotation going on out there, just have to keep the stops tight in the winners and willing to add to the losers (which is not the game we play when picking stocks, have to remember which sand box your in from a time frame, outlook, and risk management standpoint).
Stock wise, for me it was mostly set and forget for the week as I have been down in AZ enjoying this odd 118 degree weather with 0% humidity meaning you don't sweat. Being near NYC one would think thats where the A+ set ups are, however Scottsdale (Old Town) might just be a diamond in the ruff from both a business and pleasure standpoint. There will most certainly be a TE trip in the works.
Macro Rotation Outlook
Cheat Sheet
Nasdaq 7000 stop
S&P 500 280 level
Dow Jones $25,400 level
Mid Caps needs time
Small Caps $160 Support
Europe 59.50 DCA
Emerging Markets $45 DCA
China $118 in time
Japan $61 DCA
India $35 DCA
Russia $21 DCA
10 Year 3% flagging
USD cant sleep on 95
Oil lower highs, lower lows
Nasdaq 8400+ 12 Month Target
The trend is our friend however we have to realize how far the market has came in the last few months, as long as we stay above 7,100 staying long and strong should pay off, however if we start to get a little weak in the knees that will be the area to keep an eye on to free up some cash.
SPY 300+ 12 Month Price Target
Last week we were watching to see if this $280 level could get taken out and as we can see its still acting as resistance. We are still quite a ways from the prior pivot low and if we really want a strong move through $280, you should be prepared or expecting some type of pull in.
Dow Jones 300+ 12 Month Price Target
MDY Mid Cap Stocks $400+ 12 Month Target
This is what is causing me some caution in the other major markets that just took out new highs, this is the retest of highs which what usually happens? Everyone who was fucked all year is trying to get out for breakeven to safe face. You ask 100 people and most were buying at prior highs with confidence and quietly trying to get out during the correction. Now in time we will probably be buying this $360 area however for now we need to see some blood in water.
IWM Small Caps 200+ 12 Month Target
Small caps are showing is the future (months down the road), Mid Caps are showing us next week, and the major markets are showing us yesterday. We can see how the midcaps retested prior highs and lost its juice. Same how we can see retest of $160 was meet with resistance (2nd down arrow) than we can see how it took almost 3 months to get back to that level and now its grinding higher showing us $160 is the new line in the sand.
EWJ Japan +$85 12 Month Target
$61 is the DCA as this base continues to set up
VGK Europe ETF $82+ 12 Month Target
We've had some top ticking buys and some great value adds now we are seeing VGK in the middle of the range fighting with this gap fill area, next add will be above $59.50
GXC China +$150 12 Month Target
Decent range with the Great Wall of Support being $106 and some soft levels of resistance up top, for now $118 a much more defined level, we will see if these higher lows will hold or if they need to break that up before a new set up will present itself.
VWO Emerging Markets +$58 12 Month Target
VWO just continues to get tighter and tighter into this macro wedge, for now its around $1 of risk adding above $45 for an eventually move back to highs.
INDA India +$53 12 Month Target
India is still in a 10% range from this $32.50 to $35 range, give it some time and we can sneak it up through $34 for now will give it some time to set up before the next $34 DCA
RSX Russia +$30 12 Month Target
We can see how Russia is still battling with this overall downtrend however we can see how $21 has held us recently, will look to DCA above $21 in time.
10 Year Treasury Note Yielding 2.94%
The 10 year is starting to flag in this 2.7-3% range seems like we will see higher yields in time.
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 2.92% (higher = good)
Right now the 2 year Bill is yielding 2.55%
USD
We can see how $95 is still the level and might have retested too soon to really take it out however just it some time.
OIL
Charts don't lie, we tend to expect oil prices to raise in the summer as more people travel and consume more however oil went on a stupid run ahead of the summer months and as a result we've been seeing lower highs, a reason why we are stepping away from the oil sector until this down trend is broken.
Fun fact there is 42 gallons of gas in a barrel of oil which comes out to around $1.74 per gallon. So when your at the pump paying $3-$5 now you know why these countries fight over it so much.
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
VDE Avoiding
VGT $186 stop
VIS $144 DCA
VCR $172 stop
VAW $138 add
VHT stop vs $162
VFH $71 DCA
VPU holding vs $108
VNQ waiting
VOX holding vs $82
VDC starting to turn
VDE Energy
We might have sold some too early however now we are starting to see the roll over (waterfall) as we continue to bounce down to new levels of support, bounce higher, lose the buyers and roll back over. Which if your flat is great give me a chance to pick some back up in the low $90s for now just watching from a distance.
VGT Tech
Chart wise very similar to IWM $160 where here $186 is that new line of support for now, now could that level get tested before a push towards $200? Of course, so if you have break stock and you want to give it a little more room vs $180 that could make sense, for now I will not care folding under $186.
VIS Industrial
VIS has been quite the wild one lately in this range, even taking out the correction lows and quickly snapping back (where our DCA $134 and exit $143 was fucking money) now we are starting to see this $144 starting to set up.
VCR Consumer Discretionary
Great example of when having good prices you get out because of your price (a good reason) however you might miss the next leg. We got perfect stock up vs the correction retest, booked some profits than added again in a super tight spot. However the last stop out keep it too tight, so sure we miss this next move however we cant forget how well we did with it since April.
VAW Materials
Back in April we got a sick buy in this sector however as of late, it simply just was not on our radar however we are started to see a new range forming where in time that $138 will be the spot to put risk on through.
VHT Healthcare
Similar to VCR my stop was too tight where I got pushed out of some good stock (not the end of the world) however its almost funny to look at how many times we bought $156. For now I have a stop in for the rest vs my early stop out as we are now retesting this prior pivot high.
VFH Financial
This $71 in VFH is starting to remind me of $156 in VHT, for now it has not paid to buy resistance really in any of the sectors where you have to really buy into pain or up vs it. The real line in the sand is $67 so we will see if there isa chance to buy up through $68 vs it however what we know is that above $71/$72 we will have to add if we cant get stock down in $67/$68.
VPU Utility
Last week as the market was retesting highs or breaking out, it was hard to look at a risk off sector like VPU however that bear flag looked so bad, we had to buy up vs the low. Wait it looked so bad? And we liked it? How many times do we see that set up we love and it ticks the level and dies, sometimes you have to buy what you hate to get paid. Since we bought it recently we've been getting paid.
VNQ REIT
Finally got stopped out of some VNQ for profit, been in this guy for a minute clipping coupons, feels good to lock some in, seems a roll over similar to VDE could be in store, or we will be adding $81, for now waiting.
VOX Telcom
VOX has been in the tool shed for all of 2018 and still in however the first 4 inning we had some shit DCA's however in the 2nd half of this series, the last 4 adds have paid off. Now the show goes on because were expecting a move back to $100+
VDC Consumer Staples
Similar to VOX, the DCA's were just too early, however so far half are working in our favor, however we dont care about fighting back to BE were fighting to retest $150.
This DHR has been setting up perfectly to let us sneak into the breakout with the lowest amount of risk, lets take a closer look below.
Sub Sector Rotation
Cheat Sheet
WOOD $82 DCA
IHE $156 add, $154 stop
IBB $112 add, $110 stop
XT $38.50 Big Picture Level
BND bear flagging
WOOD
Was early on the $83 3rd times a charm, will DCA $82 vs $80
IHE Pharmaceutical
Had some good DCA's in this IHE and now we are seeing another tight risk spot that we can add to if this $156 wants to go, however our stop is $2 lower so were not trying to give anything back.
IBB Bio Tech
We are grinding back to this $112 area and we've had some good buys down near support in this sector so we will be willing to add $112 however we are not giving it much room, under $110 see ya later.
XT Exponential Tech
$38.50 is the Big Picture level however for now we might be able to add above $38, lets give it some time to show us that its work the add.
BND Bond Market
Base or Bear flag? With rates rising we should see this bear flags continue to break down.
The New Big Picture Set Up
The Big Picture DHR $130+ 12 Month Price Target
Getting tighter and tighter, currently above $104 is the spot vs $100 for now.
DCA $104.05
Stop $99.89
Big Picture Target $130+
The Big Picture's Updated
The Big Picture AFL $60+ 12 Month Price Target
This $46 level in AFL has been setting up all year and as of late it is handing us the tightest risk entry as possible, now sure the real out is $1.50 lower however we are seeing how we can sneak in on less than $.50 risk.
Just was not ready this week and showing us we need to stop being cute and give this name at least a buck of room.
Big Picture Entry $46.05
Stop $44.89
Big Picture Target $60+
The Big Picture EDIT $100+ 12 Month Price Target
We started to nibble on this EDIT through this recent $38 level however we know $44 is the real level in this somewhat new issue biotech, will be looking to continue to DCA up through $40, $42 and than the Big Picture level of $44.
This $38 has been a battle ground for a bit, will look to add some above this $38.
DCA $38.05
Stop $33.89
Big Picture Target $100+
The Big Picture AKAM $150+ 12 Month Price Target
We recently traded AKAM back in Feb/March and caught a nice little chop in it, as of late after a pull it, its marching right back to those $78 highs. Now doesn't this 20 year level look somewhat similar to an old friend of ours?
Remember little $25 NKTR that set up during a similar 20 year level.
Sit on your hands time, its working, it just needs time so water that plant and sit the fuck back.
Holding
Stop $74.89
Big Picture Target $130+
The Big Picture DIS $160+ 12 Month Price Target
It is starting to seem that for these bigger picture idea's, it is harder to really pick the exact day to get in and stay in for the major move, where for these idea's going forward similar to sector rotation. I am going to focus more on the spots to add vs the real outs to focus more on slowly building into each of the Big Picture Idea's to help separate away from the momentum buys that need to be exactly perfect.
This should in time help in two major factors, one will help instill more patience and also help nudge the idea of dollar cost averaging where you can really be in for the bigger % moves vs the heavier faster moves. There is no one with a gun to your head saying pick one or the other, just more of a mental mindset, where one might be a shorter term trade while the next might be something you want to set aside and hold.
For DIS we were already adding down near $99 vs $98 on super tight risk, and started to add $101. For now Big Picture the level that needs to break is $112 now you and I both know simply just buying $112 day 1 like trying to buy ALNY at $140 is a hard ask for most, yet if your already in from 10% lower, its much easier on the mental capital to add when the time is right.
When it comes to dollar cost averaging for each entry you want to be light, 1% of your overall capital could be a good starting place. Example if you have $100,000 you would invest $1,000 each time, also giving each add at least a week before adding again. If you have $10,000 it would be $100 or 1 share DIS at a time. Now sure this sounds boring AF and that's the point, when its boring you can let the stock breathe and you can hold through the ups and downs. Remember we are looking to get into this positions for the longer term, 3,6,12+ months, it might be boring the first few weeks with the positions, however you and I both know those small percentages add up in time. Same goes with DCA.
Had some great buys however got shaken out of some great stock for 4:1 RR, not the end of the world, we have seen how these virtual moves have a hard time of staying up for long.
Holding
Big Picture Entry $112.05
Stop $98.89
Big Picture Target $160+
A trader will tell you history repeats itself,
A gambler will you this time its different.....