Market Outlook
For the past few years Trump definitely applied some pressure on the previous Fed chairman to lower rates. Or at least let the world know that he was not happy with Powells job of not lowering rates. Now with the new Fed chairman Kevin Warsh's first few meetings under his belt. We got the first rate hike in 3 years, so maybe Powell was right all along.
The Fed is claiming inflation is around 3.5% where the target is 2%. The more they raise rates, the faster they can get towards that goal. For those of us with money in a high yield savings account, we got a raise on Wednesday, but for those with debt, our debt became a tad bit more expensive if the rate is adjustable.
For the market, a rate hike usually adds downward pressure on the market as a whole and for debt heavy sectors feel the pain more directly. Think real estate, semi's, speculative tech names and growth stocks that relay on cheap financing.
With all of that being said, the market really shrugged off the rate hike much stronger then expected. We got the sell off on Wednesday and by Thursday the market was gapping up and reversed the move entirely.
Sector wise, the sector that should be seeing the most weakness, actually looks the best, which is the tech sector.
Now we could chalk some of this up to how transparent the FED has been with what they plan to do. If they say theres a 90% chance of a rate hike, its no shock. If they say there are going to hike again, they have been men of there word lately. Compared to in years past when it was more of a nail bitting event. Today the FED moves much differently to avoid adding unnecessarily volatility into the market.
Now trading wise for myself lately, defintily took a few hits on the chin with some failed trades in the last two weeks, overall A+ set ups that just weren't ready. It can sting in the moment, but that's a part of trading. Reviewing those few failed trades over the last week, really just reinforced what I try to say daily, lose as little at all costs. I can live with 1-2% losses, but these few 5% losses remind me why breakeven stops are key.
Those few names that failed recently, still look great on their weekly charts and the next time they get back up to there respective levels (TEVA, HNGE and KNSA) it will be time to act. TEVA failed and then we got it back, the next time around. Which should be the same for the others when there ready.
Going into the week ahead, the tech sector looks best, while names in this space such as LITE, MU, XMTR, MSFT, MU, FTNT & SMCI all look solid for the week ahead.
Now we would like to see MU flag out for a few days under this $1,050 after the few day climb off support but zooming out, this is one textbook bull flag breakout pattern that's been forming.
With how small the ranges the market has been trading in an 8 point move back to 770 seems like a massive climb, when it reality its not even a chip shot. If we do see a move back up towards 770/780, these breakout set ups should start to wake back up again.
But in the short term, trading the ranges, i.e. finding names up off support and selling into resistance makes more sense when they present themselves in the week ahead.
From Bennett
Founder Big Picture Trading
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