I haven't seen that good of a market trap in some time. We have all been very cautious in these overbought conditions, then Wednesday's Fed projection of zero rate hikes for the rest of 2019 caused the market to absolutely explode Thursday. Seemingly every breakout setup across the market worked especially in the tech and growth names - our favorites, signaling us to quickly adjust to a very 'risk-on' stance. Friday, we saw a major down day, erasing all of Thursday's gains, with the growth and small cap names being hit especially hard. The last leg down from October to December was lead by the small caps in the IWM and we could be facing a similar environment after Friday's action.
While it is way too early to say whether or not we'll retest December lows, Friday's action tells us this is not a 'risk-on' environment from the swing trading long side. We saw the usual flight to safety in equities Friday as Utility stocks were the only green sector. I anticipate we'll see a ton of two way trades out there, may have to dust off the right hands fingertips (F12 = market sell key:) and hit some of these meaty short setups with size next week. I'll still be hunting for relative strength out there, but man do I love this HLF chart to the downside next week. Lots of the setups we've been waiting on have broken charts now and will likely need a few weeks to work that damage off.
One of the most important aspects of trading is knowing your time frame. The inverted yield curve is all over the news, which could mean trouble for the economy in time, but it doesn't mean we're in a recession or the stock market is toast. In the past 8 inversions (>4 weeks of 10/2 year spread < zero) the S&P 500 had an average additional rally of 14.38% and took an average of 12 months to top.
We have to stick to what the charts are telling us day in and day out.
Friday's Heat Map shows the damage across the market as a whole, while Utility stocks in the bottom right caught virtually the only bids of the day.
HRL has been completely unaffected by the market weakness giving us a beautiful base with a very strong weekly chart. The strength Friday is very impressive. This one is looking to give us an entry through $44 resistance.
"You aren't as bad as your last big loser and not as good as your last big winner. You are a product of your consistency. The goal is incremental improvements over time in process and temperament."