Tickers discussed: SPY QQQ IWM Strategy and Tactical Update
The Daily Profit Compass provides the stock market analysis 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.
“The black stream, catching on a sunken rock, flung backward on itself in one white wave. And the white water rode the black forever” Robert Frost
In the great Depression 1929 – 1932 it took the market 3 years to bottom; In GFC 1 2007 – 2009 it took 14 months. Now in GFC 2, with half the planet having had a sudden stop to the vast majority of economic activity, do you really think we’ll be well on our way in 6 weeks? $1200 will dull the pain but don’t construe it to be anything more than it is.
I’ve heard some on TV advise to start cost averaging in for those those with long time horizons. Where is all this cash coming from? The IRA crowd just took a 30% hit and got hung out to dry in the biggest bull trap in history. Nimble, “smart” investors also got clipped pretty good, and that probably goes double for the hedgies. So we’re supposed to start averaging back in with the 60% – 70% of our invest-able assets 3 weeks after we escaped within an inch of our lives? Heck, not even companies will be buying. Buybacks are a 4 letter word now. Companies, like consumers, will be in a deleveraging, cash-conservation mode in a fight for survival. Long -term investors, take your time getting back in; you’re not missing anything and you just might avoid getting steam rolled a second time.
Be careful out there.
Earnings
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News Flow
- A somber Pres. Trump tells America 100K – 200K could die. NYC Covid death toll tops 1000
- Social distancing crushes retail, hotels, dining
- Gundlach says we’re mostly doomed but there is a light at the end of the tunnel. Find his podcast HERE
- After how many years..the Keystone XL gets the triple final OK to proceed. Canadian energy shares pop. Expected completion is 2023
- $XRX / $HP merger called off
- Visa and Mastercard lobby to help with the $1200 relief checks
- Hospitals threaten to fire doctors if they speak out about lack of PPE gear; Some have followed thru on the promise
- $CCL begs for a dock for its floating petri dish ( ship ) that’s been drifting for days with nowhere to go. In other news $CCL aims to float $6B in bonds at 12.50% to relive the cash crunch.
Gut Punch
Group member Paul contributed the nice graphic for potential COVID economic outcomes. Thanks Paul. Very useful.
Wave 2 news flow is giving both the markets and everyday Americans a gut punch as the President levels with the nation about the anticipated deaths about to hit. It’s one thing to imagine potential bad outcomes; it’s quite another thing for them to materialize and be worse than you thought.
A few weeks ago I shared my experience of being at ground zero for Hurricane Andrew in 1992. It’s a reference point for me. Everyone imagined bad outcomes but no one imagined everything simply being gone. Not damaged, gone. I just don’t know what 7500 deaths a day over the next few weeks looks or feels like. I do know it will leave an open wound that will take a long time to scar over. I remain to believe its not priced into markets.
I do know that today you’ll likely hear less from the V-bottom hunters and “new bull market” crowd. Sure we’ll continue to follow price and let it be our guide but at a certain point I think you have to choose to be on one side of the fence or the other. Are you looking to buy dips or are you looking to sell rips? Are you hunting bearish set ups or bullish ones? One’s view fully informs what you’re looking for. In a bear market, bull set ups often fail. In a bull market, bear set ups that should work often don’t.
It’s fine to be on either side of the fence, just be open to market feedback. I don’t think it will take too long to realize if you are on the wrong side of the fence. If you find yourself there, have the courage and inner fortitude to open the gate and walk to the other side.
Wave 2 Data Flow
- 4/1 Mortgage applications / ADP employment / PMI MFG / ISM / Construction Spending / Oil inventories
- 4/2 Challenger Job cuts / unemployment claims / factory orders / nat gas inventory
- 4/3 March Employment number / PMI services / ISM non-mfg index / Rig count
Known Unknowns
- Duration and depth of the medical crisis ( nothing happens in the economy until the medical crisis subsides )
- How long will it take to get the money in the hands of companies and consumers
- How long a complicated, delicate economic cold re-start might take; like a restart of a nuclear reactor that has gone dark
- Does the crisis alter consumer behavior in a lasting, meaningful way?
- The time it takes for companies to deleverage and repair balance sheets ( many will suspend divvy and halt buybacks during this period )
- The depth of credit downgrades and for how many companies does a liquidity crisis morph into a solvency crisis
- Length of time before the fog blanketing earnings visibility lifts.
- Impact of QE infinity and exploding deficit
Index Chart Review
The chart annotations were done last night before the gap down. Like on all gap opens, be open to price flashing higher to close the gap, then reversing back down. Other than that caveat, the bull / bear pivots, target levels, and trading guidance all remain unchanged. As of this writing, price for SPY, QQQ, and IWM are sitting on either T1 or T2 marked on the charts. Breaks below those levels should open up further downside.
SPY 2 hour
Price is sitting just below $250 in the premarket. Unless $252 can be recaptured, I expect price to find $245 at T2. If you are looking to go long or short, please be patient and enter your position in or around the target levels where support and resistance reside. Entering in no man’s land greatly increase the probability of a move against you. Make sure you have a line to shoot against where you can locate an objective stop.
Follow the chart annotation where the key levels and trading plans are detailed.
SPY 30 min.
Follow the levels and chart annotations if you are an active trader. They’ve been working well and should well-inform you of the key levels during the day.
QQQ 2 hour
Price is at T1 in the pre-market. Price needs to recapture 185.50 / 186 to stem the near-term downside. Stay short below 185.50 and look for $182 as the next price objective.
Additional details and targets are in the annotations.
QQQ 30 min
If things get ugly, keep an eye on the open gap below. That gap should fill fast if it is entered.
IWM 30 min
THe trick, trap, fool and frustrate crew gave us a $2 fake bar into the close, then buried it AH. Price now sits at $108.50 near T1. Stay short below T1. Downside targets are shown on the chart.
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