Well, by now everyone has pretty much accepted that we’re in a risk-off market environment. The public is starting to panic, as the unwind of the carry trade in the Japanese yen triggers margin calls across the world.
I raised a substantial amount of cash over the past couple of weeks, and even had members in chat take some long positions in the Japanese yen.
Back in March and April, I did a Mastermind seminar here at TheoTrade where I dubbed 2024 as the biggest opportunity since 2020. The most important thing now is to not make any hasty decisions.
In the meantime, let’s review what we’ll want to see from a sector standpoint to signal that a low is near or completed…
Trade the Tape, Not the News
To be very clear – this is still a risk-off tape. As evidence, we have utilities as the top-performing sector on a one-week basis; capital is clearly seeking defensive areas of the market still.
We see utilities as the one-month leader for now, and I think this will be a trend that continues in the coming months, as long as unemployment doesn’t rise substantially.
Now, for the fun part: What do we need to see at a sector-wide level as a sign this market is bottoming?
Tech and chips.
That is, we need to see the current sectors that are leading to the downside start dropping less than the rest of the market. Then, we need to see them outperform to the upside on days the market is higher.
We’re undergoing (or enduring) a process, not a one-off event. But in the meantime, I’ll be watching and keeping you posted on the most important updates.
Tread carefully for now,
