Market Outlook
For the last two weeks the market has formed what we often refer to as a mickey mouse flag under ATHs. Those tiny bull flags that often give us very tight risk entries, yet the trade off, is that lack real momentum. As we have seen sectors like Healthcare and Telecom, to just name a few retesting there prior ATHs. The writing seemed to be on the wall that the broad market was gearing up for the same. Yet the 689 area held to the penny and on Friday we had a tiny sell off, still very clearly in the mickey mouse flag range.
As we saw with the sectors retesting ATHs and something that we highlight often is the first major retest is (often) met with resistance. Sure it can push through 690 and maybe even touch 700, but more often then not, the market, sector or stock, has to fade back into the recent range before truly being ready. We most likely will see 670 in the S&P before we see new highs. As the broader range bound market continues to set up.
Healthcare looked amazing two weeks ago as it broke through the retest, but the sugar high wore off and it pulled back into the range. Traders often can be too eager at the retest areas wanting the breakout to come the next day, when that too, rarely happens.
Just look at Consumer Discreationaries, after retesting there ATHs, its been almost 3 months and they are still flagging out gearing up for a true blue sky breakout. If it takes a sector 90 days to set up, expect the overall index to take even longer. And, really what's the rush?
Right now, we are pretty much cemented into a range bound market as most major indexs and sectors are all showing us the same side ways action. This is where buying up off support or buying up after a few days of weaknesses is the smart money move. While selling into resistance often, is another smart move as well. This is not the time to get chopped up when things are in the middle of the range or just starting to sell off after failing to breakout.
As we get into the last few weeks of trading, volume will be low. Trading will be slow and if you had a great year, this is the time to coast into the finish line. Even thought the end of the year really means nothing from a swing trading perspective. As its just another day once the new year starts. This is often the time where window dressing or tax loss harvesting comes into play. Even thought we tend to always focus on the strongest names, the worst names this time of year tend to take the brunt of this year end effect. Fund managers want to clean up there portfolios by selling off the worst names to make it look like they only held winners. Along with investors with massive gains and smart tax advisors taking advantage of this as well. If you have a loss and are thinking of cutting it to offset your gains, over these next few weeks is the time to do so.
Trading wise, on my end and for those taking the same names with me, we have kept our risk management on point recently and something we should continue to focus on.
We had a nice position in NVDA going into that 186 breakout but it just wasn't ready. We got out of dodge, lost nothing and avoided what could have been a 5% loss. By losing nothing or making a little in the name, its easy to circle back when its ready. For now, it just isn't, no reason to fight it.
We pivoted into XYZ and even with a market selling off on Friday, XYZ still closed the day near highs. As we are in this range bound market and XYZ has also been somewhat range bound. The trade is to take advantage of the range and kick into resistance.
Going into the week ahead, TSLA still looks great compared to where it came from but it most likely will take some time, weeks or months before we really see a break of ATHs. Until then, AAPL is showing us an extremely tight risk entry through 280 for a sneaky buy back. 
A sneaky buy back, for a quick refresher, are set ups that form after the ATH breakout area. A few weeks ago when AAPL took out 280, any trader who could read a chart could set that set up. Yet after it goes and fades back into the recent range, most forget about it. Then the name pulls back as AAPL as been doing and sets up again with less eye balls on it, yet tighter risk the next time around.
AS is another example of this, we tried AS through $40 a few months ago. It didn't work out then and had quite the pull in. Yet months later, its right back at that level trying to breakout again. These are the times, where we have long forgotten about the name. Yet more then likely, these are the times when the name is truly ready.
As we get into the last few weeks of the trading year, this is a great time to start reviewing your best and worst trades. Keeping your trading light and as stress free as possible. Keep up the call outs for the names that you are in, so I can also keep a closer eye on them as well!
From Bennett
Founder Big Picture Trading
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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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What Big Picture Offers:
Looking to join a group of swing traders focusing on low risk trades?
Need help with your personal or business tax filings?
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Cyclical - sectors that are more sensitive overall market conditions.
Materials
Consumer Discretionary
Financials
REIT
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What's been on your mind about your trading lately?
Reply to this email with any question or idea you've been thinking about. I'd love to hear it and dive in deeper with you.
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Defensive - sectors that tend to outperforming during sub par market conditions.
Consumer Staples
Healthcare
Bio Tech
Utilities
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AAPL
AFRM
AS
JPM
MCD
NVDA
TSLA
XOM
XYZ
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