Investor Spotlight

Sunday, July 9, 2017

My Market Outlook

In my blog last week I suggested that we should take a breather during the shortened "Independence Week" in the market. Every once in a while, it's best to take a break from the market and observe it from the sidelines while the institutions slug it out. They are the elephants in the room. They account for 80% of the total volume of trading every day in the market. They are the ones that set the tone of the market. You and I as individual retail investors, should observe their behaviour and follow their lead.

Here are some of my observations. Since the beginning of this year, the leading index has been the $QQQ. The performance of this index was +21% from Jan 3rd to June 2nd (22 weeks). On Friday June 9th, We had a major "distribution day". $QQQ dropped by -2.5% in volume that was 6 times the normal average daily volume. I found that very concerning. We have not had such a heavy volume during a "distribution day" since August 24th 2015. The index dropped down by -4% on that day. Institutions have been bailing out of the $XLK (Technology Sector) in the last 4 weeks and harvesting their profits. Since the June 9th "distribution day", we know for certainty, where the institutions are deploying their harvested profits. In the last 4 weeks, this is what the data suggests to me:

$QQQ ... - 4.10%
$XLK ... - 4.23% (Technology Sector)
$XLF ... +8.43% (Financial Sector)
$DJT ... +3.89% (Transportation Sector)
$XLV ... +2.83% (Health Care Sector)

As Retail Investors, we should look for opportunities in the leading sectors where the institutions are rotating into after harvesting their profits in the leading technology sector of this year.

Stocks to Monitor This Week

$WFC
$JPM
$WFC
$C
$HDB
$DAL
$AAL
$LUV
$CPA
$RCL
$FDX
$AET
$UNH
$MCD
$PKG
$NVR
$KBH
$MDC
$TOL
$PHM

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