Market Outlook
Never a dull moment in the market, just last week, we had Powell keep rates the same. A potential replacement for Powell annouced once his term ends in May. We had major swings in some mega cap stocks such as Microsoft having its worst day since March 2020, while low beta mega cap names like Verizon, up 10% on earnings. We had the Silver market blow up on Friday with prices crashing more then 30% in a day, along with Gold entering into a correction in a single day. Crypto names continue to crash as the massive bear flag in bitcoin continues to play out technically to a tee.
Even with all these things going on, the market brushed all that off and closed the week, a mere 2% away from all time highs.
As the market continues to get tighter and tigher, as it sets up for this breakout of 700, there is one side of the debate, where with all of these other asset classes crashing, where would they turn to? The safe boring stock market could be one plausible example. As losing 30% overnight is no fun, when you can jump into the market and sleep at night knowing that could not happen in the index.
On the other side of the coin, when everything is crashing, even the strongest gets pulled down with it, as the market being the last man standing, so to speak.
There is a case to be made for either and as always, we want to let the price action do the talking, we know on the way up, the wall of worry increases and that wall is looking mightly tall right now. If we continue to push north of 700, Healthcare and Consumer Staples are two sectors to keep an eye on.
While sectors like Energy or Materials are too extended and white hot to chase at there curent levels. The Energy sector for example has had its biggest monthly candle in nearly 1,000 days, the last time that happened, the following candle was a reversal candle, not a continuation candle higher. 
There are plenty of strenght out there sector wise as well as market wise, that the odds of a push higher does seem more likely then a push lower. Regardless of what does happen, we know the key levels, the green light is a push north of 700 in the S&P while the red light is a break down below 675 going into the week ahead.
There is a big week ahead for names reporting so it is important that if you are looking for new entries or are still holding names long, to know when they are reporting.
With how crazy some of the moves have been with names already reporting, this is not the time to get trapped in a massive gap down.
From a swing trading perspective, finding actionable set ups feels like finding a needle in a haystack. Where there have been strong moves in either direction but finding tight risk entries have been far and few inbetween. This does happen from time to time throughout a given trading year and all that is needed is often a little shakeout to reset most names to show us some set ups worth taking.
Last week, on my end, I continued to sit in GILD that gave no reason to do anything other then hold.
While we tried NVDA on Friday and took a paper cut in the name. With how strong the semi sector has been, NVDA has been for the most part left behind while a name like MU is up nearly 70% this month. It does seem only a matter of time before we see a break of this $195 area, but for now, we are just too early.
Going into the week ahead, there isn't anything that I am really dying to get into but there are a few healthcare names setting up, such as a blue sky breakouts in CAH through 216 and STE through 268. High beta names have been taken to the woodshed last week, so if you need to put risk on, focus on the mega cap names.
With all that being said let's remember the lesson from the black swan event in Silver.
Earlier last week, I posted a few charts where the $100 level in Silver felt like a psychological top, similar with $4k and $5k in gold, same with S&P 700, DOW 50k etc. Big round numbers that act as magnets on the way up, then resistance once reached. Silver $100 was the top and for 4 days that $99 stop would have gotten anyone out for a massive win, without getting trapped in the black swan event, that no one saw coming, myself included. No matter how strong the winner you are in, and the strong it gets, the more imperative it is that your stop loss continues to be risen. These are often the times where most want to give the winner "more" room, when it needs the opposite.
Now over the years, I have tried to make it very clear why we avoid leverage products or options and Friday gave us a perfect real world example. AGQ is a 2X long Silver ETF that lost 60% of its value in a single trading day. A career ending trade for many this week. With that loss, most will stay trapped in the name hoping for a rebound but the daily rebalancing will send it closer to $80 then ever seeing $400 again. Now, for some and even myself as the top at $100 felt obvious, it was hard to take the other side. Nor something I would entertain, but for entertaining purposes, ZSL was up 50% on Friday, a 2X Bearish Silver Fund. But there is only one problem.
That 50% increase in the share price was ZSL increasing by $.78 a share, if you bought this bearish silver fund any other day in history other then buying it perfectly on Thursday, you would be down nearly 99.99% on your investment.
There are trades to take, and trades to watch, avoiding career ending trades like chasing the Silver bubble in either direction was easier to watch then participate it. As the majority in either direction will end up losing out when the dust settles.
The key lesson I hope you take from this, is focus on the boring and simple investing and trading methods. There is always a shinny new thing but when they lose there luster, they turn to rust before we can blink.
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
BYD
CAH
GILD
NVDA
RRR
STE
WING
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