Tickers discussed:  SPY, QQQ, IWM, TLT, USO, WORK, CRWD, INTC, GOOGL, ATVI, CHWY, FL, MHK

The Daily Profit Compass  provides the stock market outlook for the day. Key levels and trading locations for the indexes are provided, along with trading plans and timely commentary to keep you on the right side of the trade.

Quote of the Day

If you develop patience in your life, you’ll see that manifested in your trading. In fact, our enemy the market, is a great teacher of patience. If you don’t inherently see that already, dig deeper until you see it clearly.

GAPS : SHAK , GWPH, WW, CYBR, PZZA, FSCT, PLT, FANG second day plays / bracket trade ideas.

Earnings Calendar

EXPE, ROKU, FOSL, SAIL, GDDY, SONO are some names moving on earnings that may provide good trading ops intra-day

Market Observations, Technical Developments, Outlook,  and Strategy

Trade Optimism

While yesterday we saw the indexes sell off briefly on news that the Phase 1 trade deal signing will be put off until mid -December, this morning the futures are up as China signals that the US agreed to rescind tariffs as each Phase of the deal is signed. I have a couple of thoughts.

  • The fact that the signing is delayed likely means there is no deal in place ready to be signed.
  • The tariff roll-back claim by China has not been confirmed by US officials. I think it is a negotiating ploy to box Trump in….and it just may work.
  • IF we went all this way for an order of soybeans and live hogs, it was a colossal waste of time and money. Walk away and keep grinding.
  • All of the above is just chatter and opinion. THe fact is price is green with no sell signals. Maintain a bullish bias with tight stops. If there is a trade problem we will be the first to know with a big red bar on our screens. Until that happens dont be scared out of your positions. Trust price, not talk.

Aside from energy having a bad day at the office, no dramatic moves. Financials moving higher as the yield curve steepens. The rest of the market churning with big up or down moves on earnings. Severe beatings if you miss. Nice pops if you beat.

HYG vs TLT Hi-yield bonds vs Govt Bonds is another good risk on / risk off metric. In a risk-on environment, you’d expect this ratio to rise. Although i should have extended the downtrend line, hopefully you can see the ratio falling for this year. You’d expect it to be rising if you think we are in a risk -on backdrop.

$VIX : Low level bull cross forming on the PPO. Keep you eyes peeled on the VIX.

Strategy Update:  In my opinion, now isnt the time to mash the gas pedal. While there are no sell signals and therefore no reason to close out whatever long positions you may have, that also does not mean to add meaningful new longs. The near-term upside seems very limited given where we are both in terms of price and sentiment. I think the upside is limited. Therefore…

  • Maintain bullish bias while keeping your head on a swivel.  
  • Set tight stops depending on your time frame.
  • Keep some dry powder ready; a back test that holds would be a great place to anchor new longs.
  • Be aware of the yellow flags; collectively they simply mean be careful.
  • Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails

 Earnings Season

Lots of Bracket trade set ups for second day trades out of the earnings induced gaps.   Also, there will be tons of retail earnings coming in the back half of the season.  $XRT is a great way to play if you have a bias and want to hold through the reporting period for these retail names.

$TLT Bonds

Price gave us the baby bounce we needed to hold support. With equities up this morning, I expect a give back. $136 is the line in the sand.

$WTIC  Price did not like the inventory build reported yesterday and was down 1.5% or so. Oil-related names littered the “losers” list yesterday including $XOP, the ETF that covers the E&P space. THe downtrend line and 200ema have been a problem for price for a while. Indicators still look productive but price has to prove it.

$SPY Daily

Price filled its upper most gap before a modest rally toward the close. Other than tat, no technically significant events occurred. Price above both 60m and daily uptrend lines. Until either / both trendlines break, the bulls remain in control and higher prices are to be expected.

Swing Traders.  Above $301 and bulls remain in control. Swing traders can stay long and move stops up.  I’d consider $304.75 a tight stop, but the real test will be on a back test of the breakout at $301.  If the rally is for real, there should be a boatload of buyers at that level ready to BTD.

Bottom line, have a long bias and a short leash. The dark blue uptrend line off the October lows provides a good reference point. Above ok for bulls, below and it becomes a yellow flag.  Below $304 and we’ll probably $301 quickly.

$SPY 60 minute chart – Gap filled but with price above trend there are no sell signals so stay tilted to bull side unless / until we see evidence to the contrary

Bear Set up:  Bulls are in control and breakouts are bullish not bearish. Bearish trades should revolve around the gap fills while price is above the brown uptrend line.  Below the brown line begins to favor lower prices especially if the gap at $304.74 fills.  

Bull Set up:   Maintain a long bias against the brown uptrend line.  Below it, double check your risk tolerance.  Bulls ultimate line in the sand is $301. That has to hold on any back test to keep the break out valid.

$QQQ Daily – Price continues to levitate and work its way higher as it walks along the uptrend line. As long as price stays above uptrend line, higher prices are expected.

Swing Traders.  Spinning top doji after a long up-swing is not a confident look. A red candle today would favor a conclusion of a reversal however minor.  Traders can remain confidently long above the dark blue uptrend line.  Below it gets more iffy, but nothing bad can happen with price above $194.  A back-test of $194 should bring buyers in off the street if the breakout is real. Maintain long bias as no sell signals exist.

QQQ 60 min – Price filled its upper most gap but remains above trend. Bias should be bullish until price drops below 60m uptrend line.

Bear Set up:  Above the blue uptrend line the bulls are in full control. Focus short ideas on gap fill opportunities.   Below the uptrend line bears can be more aggressive w/ tight stops above.  While reversals can happen at any time for any reason or no reason, I expect $194 to be back tested.

Bull Set up:  Not much to do except stay long against the blue uptrend line and continue to ratchet up stops.  If you have an inventory of long positions you want to keep, you can use tactical shorts on downside gap fills to hedge out some / all of those potential losses.  Simply know your gap entry locations and exit targets.

$IWM  Daily – At Resistance
Price lost about 0.6% as it backed off from long term OH resistance. No major trendline or support levels were violated. Expect chop between $157.50 and $160. A break above $160 opens door to prior highs in the low $170’s. Bulls dont want to see price back below $157.50.

Swing Traders.   Stay long against $157.50 and the blue uptrend line.  Below $157.50 and I’d be closing out longs and possibly flipping short as moving back into the meat of the trading range would be bearish.

$IWM 60 minute – THe bearish PPO crossover pointed out yesterday before the bell played out for a decent pull back. No longer term sell signals though as long as price remains above $157.50

Bear Set up:  Objective shorting locations would be a rejection at OH resistance, on a gap entry from above,  or on a break back below $157.50.

Bull Set up:  Stay long from lower levels against $157.50. Those with no position should wait for a move above $160, then get long.

**************************  TRADES **********************************

Trade set ups

$FL – Highlighted recently. Was able to pop the 200ema and move into the gap. Still a long way to go to fill the gap. If you’re not already in I’d use either the 200ema or yesterdays low as a stop. Target remains the gap fill.

$ATVI – Been a frustrating trade as price refuses to make a decisive move, but the set up remains valid and in tact. A break above $56.50 / $57 opens the door to a gap fill run. Look out to December or later if you like it.

$CYBR Mini Moonshot yesterday after earnings sets up a nice bracket trade. Alarm $120 and $114 for price moves in either direction. “Go with” price on a move outside the box.

$GOOGL is testing all time highs and has failed at this level 2x before. Bulls have to prove they can smash resistance here. A breakout could have monumental consequences for the mega-cap company by opening up for the next leg of growth. A breakdown below the blue uptrend line means another rejection and likely a trip to lower levels. Its a long above resistance and a short on a break of the blue uptrend line.

$MHK Update: Long idea featured the other day making a move to fill the gap and quite possibly go on to tag the measured move target

Recent IPO’s Test all time lows: $CHWY / $CRWD / $WORK

Honestly, could have listed 3x as many that fit this category. All 3 of these names are at critical junctures, trading well below their IPO prices with no natural support below. Alarm the levels shows. A price break below would offer an objective short w/ a stop just above. In your trading, keep in mind that stocks can go much higher or much lower than you can imagine. Trust the charts.

$INTC Semi Mega cap Intel has a similar set up to GOOGL. Testing prior highs. Alarm above and slightly below. A breakout and hold offers a nice long with a tight stop. A rejection here could mark a double top. Lots to win or lose at these critical locations.

Please note…..keep in mind my commentary from above. We dont have any broad market sell signals but we dont have the marginal new buyer either. Stay nimble and flexible. Maintain whatever long exposure you’re comfortable with but with a tight leash / stop.

Since I have no idea what you have, I am offering ideas and set ups that look promising to me. Be selective and take what looks good to you and in the context of your existing positions.

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Notes:

The charts are and levels are provided as well-informed guidelines. That said, please be aware that exogenous events like surprise tariffs or other events can easily move price through support / resistance zones.

Also, set you stops according to your own risk tolerance. The ones I have provided are to be used only as a guide. The most important aspect of your stop is to honor them. Some trades work, some don’t. Honoring your stop will ensure your loss on a failed trade will be minimal.

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