Daily Profit Compass April 16

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Tickers discussed: SPY QQQ IWM  Risk on / risk off  /  Sentiment  /   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.


News Flow

  • Initial Jobless claims at 8.30. Most expect losses of 5-6M
  • Oil bounces around 20 yr low as demand hole seen persisting for months and months to come
  • AAPL rolls out its low-end iphone SE at $399
  • $OXY bonds fall as company pays Buffett his special divvy in stock instead of cash.
  • Airlines popped after their bailout deal, but many were red by the end of yesterdays session.

Recession Watch

ES Futures are up this morning about 18 handles ahead of the weekly initial jobless claims release at 8.30. Most expect a 5M + number.  If so, that would push the newly unemployed total to around 22M over the past month. To put that number in perspective, it wiped out 10 years of job gains in a month. That cumulative number will of course grow over the next month. In the beginning it was hospitality, leisure, travel and restaurant workers.  Now lawyers, sales people and other white collar workers are getting their pink slips. My girlfriend works for a 100 yr old sales and marketing company with hundreds of employees. They fired ( not laid off ) 20% of their sales people ahead of the PPP program, then applied for the subsidy. To their credit, they’ve communicated very well with the staff. They were blunt. If we dont get the money, more people will be cut.  They are using the GFC1 as their benchmark and their sales are falling short.  Just one reference point.

Another reference point is yesterday’s Wave 2 data points.  Retail sales, Homebuilder sentiment, Empire State MFG all posted worst ever numbers. The bright spot was industrial production which was the worst since 1946.  These Wave 2 data points will get worse.  Q2 will be the abyss with GDP set to contract by 20% or more. The big banks said as much on the earnings calls. The other day famed Wall Street investor Leon Cooperman said he thinks it will take 2 years for earnings to normalize to 2019 levels.  Two years!  Leon isn’t Jesus, but isnt the village idiot either.  Currently the $NDX is just a couple of good weeks off record highs, making the whole COVID pandemic look like a dip.  The deepest recession since the great depression is coming folks and main street already knows it. Everyone I know is squirreling away savings and making contingency plans as they hunker down.  The social distancing measures will persist long after our government gives the all clear. Every time someone dawns a mask and latex gloves to go to the grocery store they will be reminded that the landscape has been altered. As an economy that is 70% consumer driven, that should be worrisome.

Yes, Yes, we’ll get long if the charts say to, but a recession is a recession and stocks go down during recessions. In addition to building your personal rainy day fund at home, keep some dry powder in your investment fund. Wave 2 is coming and I want you to have ammo to deploy when it arrives. Be careful out there.

Sector Summary


Wave 2 DATA

4/16 Housing Starts / Initial Jobless Claims / Philly Fed Survey / FOMC Balance sheet at 4pm

4/17  April OP-ex / leading economic indicators


Sentiment Trader put out his optimism index showing bullish optimism peaking. These spikes usually resolve bearishly over the coming week or so.

Two more risk on / Risk off ratios.

Utilities vs Transports

High Beta vs Low Vol

Strategy and Tactics – Tilting bearish

No changes.  Still slightly short.  and long gold and gold miners

Positioning Update: Short IWM , rolled down to Apr 24 $118P;  Long GLD May 160 C. and  GLD May 165C ;  Long GDX  May 31C.

Let’s have some fun

Here are the charts of 3 stocks and how they performed during the GFC1.   Try and guess who they are.  I will do a big reveal at the end.

Oscillator Watch

Both $NYMO and $NAMO came in after yesterdays red session but still pretty hot as numerically both are in the mid 50’s.



Index Chart Review

Follow the annotations on the charts.

SPY 2 hour

SPY 30 min.

QQQ 2 hour 

QQQ 30 min

IWM 2 hour

IWM 30 min

The Big Reveal

I hope we all can agree on the fact that we are in a recession and that it is setting up to be on par with the GFC 1 if not the Great Depression. So the stocks are AMZN, AAPL and MSFT in that order.  All got cut in half in the GFC 1.   Recessions are bull market killers and for the most part, no one is spared. I know, I know, its different this time.  Be careful out there.

New High for the FAAMG Bubble

Top 5 market cap companies hit an all time high as a percentage of the S&P 500.  Something to think about.

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