Market Outlook
What a confusing week to say the least. We started the week hovering near all time highs while Silver was taking part in a causal 35% haircut, Bitcoin was plummeting and Software names were getting taken to the woodshed like it was March 2020.
There was plenty of pockets of fear in the markets while the S&P just clung to ATHs, but when everything is looking bleak, even the market took on some of that fear. Where the market pulled into the recent pivot low area and it seemed on Thursday that a break of support was immenient.
That small 3% pull back in the index felt misleading given mega cap names, MSFT and AMZN both recently had there own 10% gap down's on earnings. While software names like APLD and CRWV were losing or gaining 20% a day.
That tiny pull back felt a bit more omnious then some of the other recent tiny pull backs we've seen since October. Just when it felt like the top was in and the floor was about to drop out. The 100 day moving average came in acting as support at a key make or break point for the market. Friday's price action saved alot of charts from technical destruction. Take NVDA for example.
NVDA accounts for nearly 8% of the S&P 500 and since October its defended this 170 area of support. Going into Thursday this recent bull flag was one more down day away from becoming a topping pattern. Yet with a nearly 8% rally on Friday, NVDA lives to fight another day. This NVDA and many other charts with strong rallies on Friday, make them very hard buys on Monday, unless you love to chase.
As tight as the recent range has been in the overall market, with 675 acting as support and 700 acting as resistance. The market is getting close to a make or break moment, either the breakout continues higher through 700 or we see a roll over and down through 675.
On Thursday, I would have been in the camp that were topping out, but Friday showed buyers are still around. As the Dow Jones hitting 50,000 for the 1st time, while Energy, Consumer Staples, Industrials & Materials sectors all hitting new ATHs this week.
It seems rotation has been somewhat clear, broadly money is rushing into the large cap names, when markets feel a bit shaky, you rather be in the largest names compared to the tiny players.
While sector wise, the defensive names continue to be getting all the love as Energy and Staples continue the vertical ascent behind Industrials and Materials.
If you feel like you are left behind in this market, don't be. The names and sectors that have already gone, are too late to chase, while the laggards shouldn't be touched. If a name you were looking at closed red on Friday, delete it from your watchlist.
There are easy swing trading markets and there are hard ones, currently this feels like a very hard market to trade unless you really pick your spots or are already positioned for the moves.
Given the strong snap back move on Friday, where there were handfuls of names up 5-10% plus, there can be and should be some follow through going into Monday but it is often hard for those big up days to roll over and continue as they did. Just like APLD and CRWV were down 20% on Thursday, then up 20% on Friday. With these big moves, there are often equal or greater moves in the opposite direction, as they seem extremely unlikely in the moment. Just like Fridays snap back was very surprising. A Monday sell off, would be just as puzzeling.
On the swing trading side, cash for me is still a solid position to be in. Sit out power is great when set ups are not clear. Scanning 1,000s of charts, it feels like finding a needle in a haystack to find a tight consoldation. Continue to focus on the strongest sectors and then scanning those names. Right now Healthcare and Biotechs look poised for a breakout higher on very defined and tight risk. That is where my focus will be on for the week ahead.
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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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
Utilities
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Big Picture Set Up's
CHEF
GILD
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REGN
SXT
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