A new week and a new opportunity to improve our performance. Futures are indicating a lower open to begin the week and after this most recent push higher this comes as no surprise. We saw last week the bulls take over and active money managers exposure nearing extreme levels. A little pullback would not be a surprise to us here. Despite a potential pullback we need to make sure our holdings are holding key levels and the overall market avoids heavy distribution. No one knows the future. Many will try and predict what will happen next, but in the end will ultimately fail. We follow the price action of the market and stick with strength. It is no magical formula we discovered, but one we follow and produce great results. This market will provide an opportunity and we know how to take advantage.
Small cap stocks still are stuck in a range and have yet to join QQQ and SPY hitting all-time highs. Perhaps soon we will see IWM rip higher breaking free of its current range. It has been quite a long time since we have seen the group lead this market. QQQ has dominated the market for a few years now as money managers flocked to large cap stocks. FB, AAPL, AMZN, NFLX, and GOOGL were the popular names fund managers used to pile into. AAPL and GOOGL continue to hit highs. NFLX is the laggard of the group while FB and AMZN sit in consolidation patterns. Both could breakout. There is always a possibility IWM will never overtake QQQ and SPY as a leader. However, we will simply focus on strength and if IWM begins to lead we’ll jump aboard.
We continue to see the yield curve normalize and interest rate sensitive sectors adjust. XLU and XLRE are adjusting to higher rates. The next rate adjustment from the FOMC isn’t expected until next year and odds are slightly above 50%. Trade relations with China are still in a holding pattern and a reversal of the agreement in place will certainly trip up this market. Now, rates have normalized, and the stock market is holding its own. There is no need for us to overthink this market. We need to execute.
We hope you have a great week of trading. There is always opportunity all around us. The weekend is behind us and it is time to get to work!
