Tickers: SPY QQQ IWM FB AAPL TSLA MSFT AMZN GOOGL NFLX SMH XRT MTUM
Before the Bell is premarket prep for active traders. The note provides detailed stock market technical analysis focused on the indexes and FAAMGs. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade.
Inspiration – The 7 Habits of Paul Tudor Jones
If you’ve decided you’re in this trading game for real, integrate these tenets of Paul Tudor Jones’ Market Wizard career success into your process. You’ll be miles ahead.
- “Don’t ever average losers.” When a trade is going against you it means you are wrong. Adding to a loser just usually makes it bigger and your stress overwhelming.
- “Never trade in situations where you don’t have control.” Getting into a trade that you can’t easily get out of is a dangerous trade in itself. Liquidity risk, headline risk, and volatility can be dangerous when you are at their mercy.
- “If you have a losing position that is making you uncomfortable, the solution is very simple, Get out.” Many times exiting a trade is the easiest way to stop a losing trade from getting worse, managing stress, or freeing up capital for other uses. You can always get back in.
- “Don’t be too concerned about where you got into a position.” All that matters about your current positions is what you should do now based on the current price action not your cost basis or entry level.
- “The most important rule of trading is to play great defense, not great offense.” Trading offensively is trying to grow your capital while defense is protecting what you have. Winning trades are how many points you score and losing trades is how many points you give up to the other team. While offense is great for a show, defense wins championships.
- “Every day I assume every position I have is wrong.” Mental flexibility is the ultimate effective habit of successful traders. Being willing to accept that a trade is wrong will lead you to cut losses fast, keep losers small, and lose your opinion not your money.
- “Don’t have an ego. Always question yourself and your ability.” Being over confident and arrogant leads to trading too big and staying on the wrong side of a trend for too long. Most account blow ups and ruin comes when a trader believes they are smarter than the markets and stay with their strong convictions after being proven wrong.
Lots of retail reporting over the next few weeks.
Today’s Companion Video
The video is a detailed technical review of the indexes and FATMAAN names. All the key trading levels are identified along with commentary and trade plans for each ticker. Trade ideas are also discussed. Run the video at 1.5x to maximize efficiency without loss of clarity.
Macro Data Releases Week of May 16
- Monday – Nothing
- Tuesday – Retail Sales, Industrial Production, Housing Prices, JPOW speaking at 2pm
- Wednesday – Housing starts, oil inventories, 20 yr bond auction
- Thursday – Jobless Claims; Philly FED; NatGas; 10 yr TIPs Bond auction
- Friday – Rig Count
This week has been a wake up call on the consumer this week. When premier retailers with top-notch management teams like Walmart and Target have a complete whiff on earnings, something is changing, and changing FAST. I incorrectly thought that the lower end retailers would flourish as consumers trade down. Well they traded down alright, so much so, that they traded down to essentials only. Think Food and toilet paper and nothing else. They walked past he higher margin items like apparel and general merchandise. So now these retailers have a mountain of inventory to work through in the months ahead. Even stores like Dollar Tree, Dollar General, Costco, and BJ’s got clowned. The consumer is feeling the pinch of inflation in a big way. Discretionary Retail is in the cross-hairs in a big way. Apparel, restaurants, cars, etc are going to feel that pressure. $XRT is the equal weight retail ETF. While its clear the breakdown is already underway, I think there’s more in the trade. Before it’s over I think this finds at least $50-$45 towrd the pre-covid highs. If we slip into recession, the covid lows of $25 would not be out of the realm of possibility.
Saxo Theme Basket Performance
$MTUM Re-balance portends to be impactful
The $MTUM ETF has traditionally been piled into tech stocks because they’ve been the momentum names. But now as tech has stalled, the momentum is in energy and materials. $MTUM is going to do it’s semi-annual re-balance next week. THe key thing to understand about this rebalance is the relative size of the assets. Imagine selling down a position in AAPL that is a $2.4T market cap company and then piling those assets into energy names 1/10th the size. Think a firehose into a thimble. THis could really spark the next leg higher in energy. Certainly big names like XOM and CVX will see inflows. XLE is an easy way to play given XOM / CVX are about 50% of this cap weighted index. On the flip side is the selling of mega cap tech which could be significant and may move the needle. Find and ETF web-site to look at the top components of the MTUM ETF where most likely a lot of selling is slated to occur.
Do your homework on this one. This is a thumbnail of what’s going on. Find the article HERE
Normally the week after a big OPEX is a dangerous time for markets. As lots of delta and gamma roll off, markets more easily able to find a new level of trading. THis month-end buying may tilt the balance to the upside. Also note, FOMC $65B of balance sheet QT is slated to start on June 1.
Macro Framework Spring / Summer 2022
Find the Blog Post HERE
Earnings Season & Bracket Trades
As earnings season kicks into gear, a reminder that this is prime time for Bracket Trades. Bracket Trades are those trades created when a stock gaps up or down from a news driven event. Bracket Trades are set up as “2nd day trades” where you alarm the high and low of the prior day’s trading range, then patiently wait for price to either break lower or higher from the range. You then follow price out of the range. I will do my best to help identify them for you, but you can easily find them yourself by doing a sort for “GAP ups” and “GAP Down” on your trading platform. I add additional filters for only stocks above $10 and at least 500,000 shares traded. You can add additional filters to cut down the sort further. Generally speaking, stocks favor continuing in the direction of the gap higher or lower.
You can find out more about Bracket Trades in the video Run the Player at 1.5x HERE.
Use the following pivots and levels in your active and swing trading.
IWM 1 hr
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