Market Outlook
We did a great job navigating the overall weakness that the market was handing to us for most of last week. Going into the end of the week, the writing looked to be on the wall that support could get broken to the downside. But, Fed Chair Jerome Powell came out with an announcement that sung a different tune than the one he's been playing lately.
It has been no secret that Trump and Powell do not like each other. If you've seen them in video's together, its like two kids fighting over the same toy unsuccessfully. Trump wants lower interest rates to lower our debt problem, while Powell is looking at a stock market at all time highs and wondering why he needs to lower rates to further fuel an already strong stock market.
Powell has postured and I feel rightful so, holding off on cutting rates. It's like giving the kid acting like a brat another toy. When markets are crashing, cutting rates are a great lever to pull to calm the markets, but a stock market at highs? It seems Powell is saying he isn't feeling the political pressure but at the same token changing his stance. By making this change in outlook and saying he will remain open minded to a rate cut soon is easier to just give the people what they want than risk being the person everyone has there pitchforks pointed at.
On a side note as we hear more of the Dovish vs Hawkish jargon let's quickly explain the two.
Dovish - the goal is to support economic and job growth, think gentle, accommodating and supportive. This is done by lowering interest rates, making borrowing cheaper which encourages spending, investing & hiring. The downside is it can lead to inflation.
Hawkish - the goal is to get a grip on interest rates and inflation, think strong, aggressive and protective. This is done by rising interest rates, which slows the economy down. The downside is it can slow growth and risk a recession.
This announcement came at a key point in the market as the Nasdaq was at a clear level of support that kept the party going. As for now the new key pivot low is 560, with resistance up at 580 for now. As long as we stay above 560, anything above is bullish price action.
Fridays action snapped the market out of the baby slump it was in. However if the market is not able to break above 650 this week. It could spell some trouble as a market needs to trade in normal ranges to grind higher. Think of a massive bull flag in a 20% range, when it breaks out, it rips and climbs 20% higher. When a stock flags in a 1% range, the break, is barely noticeable only until you zoom in. The smaller and smaller these ranges get, eventually will lead to a break into a new broader pattern.
With the FEDs potential new pivot, the thinking at first is smooth sailing to new highs, however temporary bandaids often don't help bigger cuts.
The week ahead will be an interesting one to see if the bullish close spills over into the new week.
The alerts last week even during the weaknesses still showed great upside as CBRE closed the week at new highs. Going into the new week, I am not overly eager to chase Fridays action. If you are holding names that showed great action on Friday, those lows of day of those names should be the new line in the sand. If they continue higher this week, amazing. If the sugar high wears off, you know your exits.
Call out those top ideas in the group and I will continue to set alerts for your top ideas along with my own. Hope to see you on the Chart Talk call after the close on Monday!
Lastly, thank you to all the members who have already signed up, if you have not already you can still lock in 50% off your TE rate on this link here.
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Macro Rotation Outlook
SPY
Dow Jones
Nasdaq
Mid Caps
Small Caps
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Sector Rotation
Sensitive - sectors that have moderate correlations to overall market conditions.
Tech
Energy
Industrial
Telecom
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Cyclical - sectors that are more sensitive overall market conditions.
Materials
Consumer Discretionary
Financials
REIT
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Defensive - sectors that tend to outperforming during sub par market conditions.
Consumer Staples
Healthcare
Bio Tech
ADP
RSI
GNTX
HII
TSLA
FIX
MOD
CBRE
GLW
PII
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