What Could Go Wrong?
Successful investors are always worrying about risk management and keeping losses small and under control. I believe it was Druckenmiller who said “Every day I come into the office I assume every position I have on is wrong.” This nascent rally feels like it has legs and may be ready for the next leg higher, and one should let their winners run and move up trailing stops accordingly. But one should be aware of things that could trip up this sizable bounce. In the consumer space, the chart below comparing the consumer discretionary sector to the staples is a good “risk on-off” gauge. Of course, the XLY is very waterlogged at the top with AMZN and TSLA, each moving in separate ways (AMZN:MELI ratio chart continues to favor the latter), but AMZN is doing a lot technically right as it recently retested its rising 50 day SMA for the first time after the bull flag breakout. The XLP is top heavy as well with COST the number two holding, and perhaps this ratio chart will come down to does one want to buy in bulk or online. Above the 670 bull flag pivot a 100-handle measured move could come to 770.