Market Outlook
The market is a whopping 4% off all time highs, yet its felt like the market has been entrenched in a bear market over the last few weeks. The writing has been on the wall over the last month, that after many months of an easy breakout market, things were starting to change.
We've known of the key out, that being 650 in the S&P and it finally got tested on Friday. It wasn't this monstrous sell off, but one that the buyers stepped in, to try and support.
The price action lately has been showing us all the signs that we need to see that a break of support and more then likey a correction is coming. This slow inch higher each day for months was great, but now we have to embrace the correction around the corner. A break of support and a retest of the 200 day would get the correction out of the way while giving the market a real range to trade between.
It does seem like 700 in the S&P is going to be the new macro resistance area, just like we saw with Gold around $3,000 an ounce. Technically we didnt see it, because no one's cared about gold for the last 10 years except for the brief period that it broke out recently.
Scanning charts this weekend, was one of the first times, where most names actually looked quite better overall compared to the index's. Where in the rally until October, the market looked much stronger then most individual names.
Scanning charts this weekend, was one of the first times, where most names actually looked quite better overall compared to the index's. Where in the rally until October, the market looked much stronger then most individual names.
Where this is really the gift and curse of the over weighting that the FAANG names have on the index.
Last week, even with the overall market and most sectors pulling in, we mananged to tip toe through rain drops on the trading side. Names like REGN and WMT broke out nicely while names like CACI gave us the breakeven outs we needed. Our best swing TSLA, showed us that even the best chart out there can turn on a dime, when the market gets weak. What looked like a blue sky breakout 2 weeks ago, now looks like a potential break even trade if we wait long enough.
As we head into next week, expect the chop and back and forth action to continue to increase. As we get near support, and the fear levels increase, peoples tendency to overact increase. A smooth market is easy to hold, a choppy one makes people want to hit the sell button.
As we continue to see with each passing week, less is more. One good idea like holding onto REGN for $100 move higher is far less work, then trying to a handful of names to trade.
We do not want to be the hero's running into the fire on the active side, meaning this is not the time to buy the name getting crushed. I've spoken to quite a few non members who have been buying bitcoin, or META or even BULL and losing money hand over fist, full of reasons why they will be right as there investments drop.
If you are buying a stock expecting a breakout and its closing under the breakout level, get out. Plain and simple, time is not on your side when wrong in the current trading conditions. CACI went $20 in our favor then came back, it still looks ok, but not worth the risk in these conditions.
Right now you want to focus on the larger cap, boring names. High beta tech & semi's we want to step away from in the short term. When the markets get rocky, lower beta names keep us safe. High beta might sell off 10% in a day while a bad day in a low beta name might be 1-2%.
Since April, we were in the wall of worry market, as we worry when the market is going to top out. It has already topped out and now the slope of hope begins, as traders hope to see the prices they were buying recently. This is where being selective is imperrative. This is not the time to "try something new" or change the rules to make excuses for idea's that are not working.
Cash is a position and waiting for the right set up is key. Continue to call out your ideas in the chat before your entry so we can make sure the trades not worth taking can be avoided. While we can focus on the best setups that are worth taking.
From Bennett
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