Market Outlook
Last week we saw both the S&P and Nasdaq both hit new all time highs. The S&P briefly retested the all time high area and was met with resistance, which should not come as much of a surprise. While Nasdaq spent most of the week in the new ATH area as it broke higher on the 3rd attempt at the ATH area.
Now typically when markets are at highs, sectors are often following suit. But other than tech names, mostly every other major sector is in some type of correction. Which at first glance makes little sense how the overall markets could be at record highs while most of the sectors inside of them are near or heading towards 52 week lows.
But that just continues to show how much weighting the mega cap have on the indexes as a whole. Where a handful of names can prop the entire index up and make it appear much stronger than it actually is.
We have been seeing some of this weakness for about a month now and there are glimmers of hope that these breakdown stages might be starting to shift into stage 1 bases.
Industrials are one of the first sectors to show us this glimmer, for over a month this sector went from bull flagging at highs to a month of breaking down. Now for the last month we are seeing the textbook stage 1 base forming.
For the other half dozen or so sectors that are in stage 4 breakdowns, which are REITs, Consumer Discretionary, Utilities, Financials, and Materials. All of these sectors will eventually need to follow the price action that Industrials have been showing us.
As always, following the strongest sector for set ups is always the path of least resistance and for now the continued focus on Tech, Semi and Software names continue to show us textbook bull flags that have been giving actionable set ups. But less is more still tends to be the best course of action in this trading environment.
From Bennett
Founder Big Picture Trading
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Cyclical - sectors that are more sensitive overall market conditions.
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Defensive - sectors that tend to outperforming during sub par market conditions.
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