Tickers discussed: SPY, QQQ, IWM,
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 Inspiration for the Day
Tackling destructive emotions is THE major task of the aspiring trader. Learning technical trading techniques and processes are relatively simple in comparison to the hard work of dealing with the destructive psychological tendencies we all have. That work is what I call “work in front of the mirror”. They say 90% of aspiring traders fail. I can only assume that these same traders refused to do the hard work to conquer their destructive tendencies that undermine performance. If you are having difficulty trading, dont look for a new process or secret indicator, look in the mirror. There is where your problem and solution lie.
Earnings Calendar Retail earnings pick up this week. M / JWN / ROST / SPLK today PDD and PAGS set up for bracket trades today.
We saw some corrective activity on Trade news. Anyone paying attention would likely conclude there was a problem with the Phase 1 deal. It should be a simple deal. Not much more than an order for soybeans and live hogs, but the fact that its taken so long points to a bigger problem likely linked to existing tariffs. All that aside, our focus should be on price. The intra-day drop on the trade news pushed price deeply lower to fill the first gaps on SPY and QQQ before recovering to cut the losses. Momentum is waning on both SPY and QQQ as shown on the PPO indicators that are poised for a bear cross signalling a likely pull back. How deep a pull back is anyone’s guess, but I remain in the camp that the breakout will be back-tested at SPY $301 and QQQ $194.
No changes. 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.
- Maintain bullish bias while keeping your head on a swivel.
- Set tight stops depending on your time frame.
- Keep long exposure in balance with your risk tolerance.
- Keep some dry powder ready; a back test of the breakout levels that holds would be a great place to anchor new longs.
- Be aware of the yellow flags; ( low volume climb, ultra low volatility, excessive bull sentiment, excessive call buying ) collectively they simply mean to be careful.
- Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails
- Nimble, active traders can hunt for momentum plays intra-day with the plan to close at the bell.
Market Participant Positioning. As we move forward, keep in mind that as we moved into thin air over the past couple weeks, it has been on low volume with most of the shorts either being dead or squeezed out. Having shorts in the market provide a buffer on the way down as they cover to take profits. With short exposure lower than normal, that buffer wont be there so faster downside moves can happen. Additionally, there may be weak-handed longs out there that were happy to milk every last cent of the rally but may hit the exits quickly at the first sign of trouble. These are not predictions, just a heads up that if sell-side activity ramps, prices may fall further and faster than what you’d normally expect.
$SPY Daily – No changes. Price managed to hold the 8ema which is key. Watch the PPO for an emerging bear cross and a break below $309.55. Such a move would favor a move to $308 as a first target and the 20ema at $307 as T2.
Swing Traders. Above $301 and bulls remain in control. Swing traders who are long from lower levels may want to consider raising stops from $307.66 to $309.55. This level would allow for a pull back to fill the gap but would get you out if gap support did not hold. Feel free to set your stops according to your risk tolerance but I do think you need to be raising your stops methodically through this bull phase. Bottom line, have a long bias and a short leash.
$SPY 60 minute chart
Bear Set up: A move below $309.55 should bring in more sellers. Targets below are $308 and $307.
No changes to technical picture. Swing Traders. Bulls in full control so your bias should be to look for entry points if / when you see a pull back to a marked level. Place stops just below in case the pull back morphs into something more. With price above the rising 8ema not a lot to worry about on the downside. Sit taller in your chair if price closes below its 8ema.
QQQ 60 min
Bear Set up: 201.43, $200.50, $199.85, $199, and $197.63 are price support levels and objective places to either add to or initiate short positions. Like SPY, QQQ is in an uptrend so keep it real on position-sizing. Bulls may decide to defend any of the levels listed above so be ready for bounces.
Bull Set up: Honor what ever stops you have in place. I think a break below $200.50 would signal a deeper pullback. Watch price action at / near support levels for signs of buying. Play level to level.
No changes to the technical picture as price remains trapped between $157.50 and $160. Swing Traders. Stay long against $157.50 and short against $157.50 with a break below. A break above $160 that holds will be a great place to anchor a long for those that have been on the sidelines waiting for a decisive move.
$IWM 60 min You can see the well defined trading range between $157.50 – $160. Price action between the range is choppy but wide enough to trade if you’re sharp and nimble.
Bear Set up: Short below $157.50 w/ stop just above.
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$DIS – Please alarm $144 and $150. A break above $150 and Disney could be a $175 stock. A break below $144 could mark the beginning of a retracement move. Note there is an open gap from $132 – $136 that will get filled at some point.