Market Outlook
Bit of a quiet trading week last week compared to the week prior — which can actually be a good thing to dial down the fear for most traders. Last Friday’s action compared to this Friday’s was a night and day difference.
We’ve seen firsthand the subtle shift in the S&P 500 as the extremely obvious breakout stage has slowly transitioned into what, for now, appears to be a topping pattern.
Just like we didn’t want to fight the uptrend since May, we’re now starting to see resistance form in another direction, not just up. Now you, me, and anyone else who can read a chart can see our eyes gravitating toward 650. A few weeks ago, those same eyes were looking north at new highs.
As much as we want this small downtrend resistance area to break to the upside, it does seem that the path of least resistance is, at first, heading sub-650. Now, as the Robert Kiyosakis of the world shout that the next 1929 is coming (as they do every time the market drops 1%), I don’t see that being the case.
I’m in the camp that we do see a break sub-650, but it’s like those times we buy a breakout and it just isn’t quite ready yet. A few weeks later, after chopping around, it goes.
Think of the Healthcare base breakout, we were hawking it in September. It went a few dollars, came back, and had to do one tiny shakeout before ripping. That yellow circle is where the market feels to be right now. It’s trying, but the trade is crowded, and we need to shake the tree a bit.
This shakeout lower is warranted as we have seen the weakness in sectors like Financial and Materials, and a handful of other sectors recently. Now the indexs are still holding up as the QQQs are still in the overall breakout stage.
My focus sector-wise during this temporary shakeout is still on the Consumer Staples space.
There were plenty of Consumer Staples names last week that rose higher like WMT, KO and BUD that we took advantage of. We’re only one week into the chop, and lately, when the market starts to show cracks of weakness, it tends to last about a month. That means we likely have just a few weeks to go. We can hide out in the Consumer Staples sector and then rotate back into the sectors that have cooled off once the market shakes out.
Within the Consumer Staples space, there are still great setups, like the blue-sky breakout in CASY through 570 and in Tech, RBLX through 140 looks great as well.
The big focus this week for those still holding TSLA will be its report on Wednesday. We’ve talked for years about earnings, and if you need a refresher, the lesson is simple: avoid holding into earnings unless you have a proper cushion in the name. Being up 20% or more is enough of a cushion to hold through earnings. Here’s the key thing to remember, if it gaps up, the play is to hold until the following earnings at least, not sell into the pop. On the flip side, if it gaps down, the proper exit is still the proper exit, for me, that’s breakeven.
If you have any questions about this market or specific names you’re in (or looking to get into), post those ideas and share your thoughts in the chat!
From Bennett
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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
ATRC
BUD
CASY
IDXX
SHEL
PLTR
TSLA
RBLX
OKLO
TEX
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