We've been blessed with an amazing summer market for trading. The S&P 500 hit new all-time highs during more than 20 of the summer trading days over the last 3 months. An amazing feat and one that our Big Picture Models have ridden the wave higher each and every day.
As the market continues to inch to new highs in this summer breakout stage, the areas of resistance and support have been extremely clear. Unless there is some new boogeyman in the market's closet, this trend should and can continue for some time.
At the upper ends of the range it can be hard to put on risk and that's ok. We are patient traders and in this market, sometimes all we need is a 2- to 3-day reset before the market is ready to climb higher again.
We do have to keep in the back of our minds that as this market get easier to trade, we tend to lose the sharpness or attention to detail that we have when a market is crashing. As a result, when the market does finally change for the worse, most have that feeling as if you just woke up an hour late to your first day of work.
We have some clear pivot lows and alarms set to remind us and wake us up at the proper time. As long as the S&P 500 stays above 620, anything above that is normal price action.
We spoke on last week's Chart Talk call about the potential change in Tech, similar to what we saw with Materials and Biotechs in the past few weeks. Where they started to hug closer to the support trend line and broke down below, shifting into a new basing stage.
Tech, which has been the leading sector, with the other two are laggards, is showing similar action. With the failed breakout last week and Tech right back at support, the writing is on the wall that a break of these supports seems to be in the cards.
Now both Materials and Biotechs turned it around and snapped back, but the clearly defined channels were left behind. If this happens with Tech and other sectors start to follow suit, we should then start to see a bottoms-up copycat price action to follow. Where more sectors follow that move and then with enough time the overall market does the same.
None of this is a pull-the-fire-alarm-and-run-for-cover call, but just one to keep in the rearview if/when the easy breakout market starts to get a bit more choppy. Until then, I'm continuing to put the capital to work each day. Last week we closed out of a handful of solid trades like WMT, EBAY, and MEDP, making anywhere from 3-6% on those names where the risk was barely 1% from the start.
There are a handful of top ideas going into the week that we will cover in greater detail at the close tomorrow. With two weeks left in summer, make sure to get out there and have some fun.
Macro Rotation Outlook
