Big Picture - Wait Till Wednesday

Since October 9th, we’ve started to see something a bit different from the market than what we’ve been used to. It felt like volatility was about to come roaring back after the first 2% down day in six months.

Just think about that for a second, we hadn’t seen a 2% down day in half a year. If there’s ever a reminder of why we buy the market consistently, there it is.

We had that quick selloff, and it felt like maybe the market was topping out and the juice was fully squeezed. However, Mr. Market had a different trick up his sleeve. After October 9th, volatility dropped like a stone, and the market quietly inched out a new all-time high after flagging for two weeks.

Now, this wasn’t the biggest breakout, but it was still a great sign to see. The key thing for us as swing traders is to know when to fold ’em. The indexes are giving us extremely clear signs of when to step away from the table.

For the S&P 500, that level is a break below the October 9th low of 652.

For the Nasdaq, it’s a break below 590.

The Nasdaq names have led this rally as the semiconductor sector continues to defy gravity and push through macro resistance.

If you’re still holding semi names, more power to you, but if you’re not, or recently got shaken out, this is not the time to chase them.

Just like how chasing gold last week has already proven to be a costly idea.

Sector-wise, nothing is really a screaming buy right now, and for good reason, with major news on deck in the week ahead, its wait and see mode.

We have the Fed rate decision on Wednesday, with expectations of a 0.25% rate cut. REITs have been pricing this in and have rallied off support, but are still respecting the resistance trendline of the macro wedge that’s forming all year.

Back-to-back rate cuts are an extremely bullish sign, not necessarily immediately, but over the months that follow. Historically, any time we’ve had consecutive cuts, the market ends up higher 6 months out. If we get that cut, expect the breakout trend in the indexes to continue into year-end.

We’re also in the thick of earnings season, with all the mega-cap names reporting, Apple, Microsoft, Meta, Google, and Amazon.

As hundreds of stocks continue to report this week, our focus should stay on those that gap up. From there, give them time, about a month, to set up properly. Even TSLA will likely need another month of consolidation before it’s ready. Be patient and let the setups form.

Once you’re in, aim to hold through the next earnings report, FIX was a great example of this approach paying off.

We also have the government shutdown, which, in reality, means nothing. Trump is still working regardless, and his upcoming meeting with China will be another big market catalyst.

Expect a slow start to the week until Wednesday’s Fed announcement and the updates from the meeting with China. When we get those two, we should see the market pop back alive for better or worse (most likely for the better). 

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Macro Rotation Outlook