Market Outlook
Last week we witnessed the largest IPO in the history of the market. Going public at a valuation that puts it in the top 10 largest companies in the US. Another wild fact was during SPCX 3 day rally, the increase in value was more then what Buffett was able to make in his entire career. To say, we are in a euphoric market is an understatement . But that is also the time when new companies come to market. Now these market euphoria most likely will continue on as the Anthropic and and OpenAI IPO's are set to issue latter this year.
We caught a nice trade in SPCX last week on very tight risk as the IPO ATH setup played out perfectly. SPCX was flagging out at 176 vs 172 and all we had to do was buy the new high and ride it nearly 50 points higher in 2 trading days. After that new high was put in at $226, that is the next IPO ATH set up. But while the name trades inside that range and above 150, it is mostly an avoid as now is when the chop comes into play.
Sector wise, Semi's continue to lead the charge and don't seem to care that they have increased by nearly 80% in the last 60 days.
And as they continue to climb towards the moon, they are trying to drag tech names along for the ride, but tech is having a hard time keeping up with the aggressive pace.
While Semi's are putting in higher highs, Tech is still just trying to hang on to the current flag its been forming. The rally in Tech is looking somewhat similar to the run we saw in Energy at the start of this year.
Energy stocks broke out of a decade plus long resistance area and climbed nearly 50% in a similar time frame as Tech has recently climbed. Energy put in its high and then could not get back to retest that area. After a few months they are now fading back towards recent lows as money is running out of this sector.
Now Tech is showing us similar signs but for now it has Semi's helping hand and the two major IPO's later this year to also give them a boost.
Overall we should expect the market to continue its path of least resistance climbing higher until those two other major IPOs come to market. The question to start to ask yourself is what is the next sector to take the lead. We saw Energy lead, when no one cared about Semi's or cared as much as they do now. We have to remember that the market lows a rally but hates it once that sector turns cold. Semi's are still boiling hot but when the water cools, a new sector will take over.
Industrials and the Consumer Discretionary are two sectors to keep an eye to take the torch and run with it after Semi's tire out.
From Bennett
Founder Big Picture Trading
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Macro Rotation Outlook
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Sector Rotation
Sensitive - sectors that have moderate correlations to overall market conditions.
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Consumer Staples
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Utilities
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