Daily Profit Compass April 22

Tickers discussed: SPY QQQ IWM USD  XEU   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.

Earnings

News Flow

  • The oil drama rolls on as Brent crude drops to levels not seen since 1999.  Meanwhile IBKR reported losing $88M as various clients “blew up” their accounts when not being able to cover their oil losses.  The broker is responsible for any funding shortfalls.
  • Roche CEO calls existing COVID anti-body tests a disaster and worse than useless.
  • BoA slaps an underperform on TSLA
  • China feels the heat as more nations blame them for a COVID cover-up

Chop at the top

So after 2 days of selling to start the week, futures are up 1-1.25 %  as price chops around at the top of the range. When you look at the index charts, pay attention to the large volume / price bars at the left. I’ve pointed them out in the notes. These large bars indicate that a lot of transactions have been made at a certain price. These over-sized bars act as resistance on the way up and support on the way down. Given we are at the top of the ranges, these will be key areas for bulls to hold and for bears to break.  So these price areas act as pivots.

Yesterday was really the first time in a long while sellers came after big cap tech in the FAAMG names. As you’ll see below in the Sector Summary, tech led to the downside followed by financials and communications which is a code word for Facebook.  Because of their sheer size, the FAAMG names are the key to them market. Lots of carnage can occur beneath the headline number of the indexes, but unless the FAAMG names see more focused selling like yesterday, the market and specifically the Q’s should remain resilient.

Sector Summary

 

Large Companies raid the PPP coffers

Anger and resentment grow with “real people” as it is revealed how large publicly traded companies elbowed their way to the front of the line for the Payroll Protection Program aimed at small and medium business that are in a fight for survival.  So, if you ever had any doubt, crony capitalism is alive and flourishing.  Depending on how the whole COVID recovery plays out, don’t be surprised if Occupy Wall Street 2 “the sequel”  comes to a theater near you in the future.  People are getting sick of it.  Its been said that it would be cheaper to simply give every household $150,000 to tide them over during the COVID recovery than all of these programs that never seem to filter down to the people who need it most.  Rant over.

Wave 2 DATA

4/22 Mortgage applications / Oil inventory

4/23 Jobless claims / New Home sales / Flash composite PMI / KC Fed MFG Index /  Natgas inventory

4/24  Durable Goods / Consumer sentiment

Charts in Focus

$USD Weekly and Monthly, plus the EURO $XEU

Although not many of us could be labeled as active currency traders, it pays to keep the Dollar and key currency pairs on the radar screen. A surging USD ripples through the global finance system as dollar denominated debt becomes harder for EM countries to pay back. It also has a big effect on commodities and precious metals as a headwind.  Pay attention to the Euro. A break below 104.50 likely sends the Euro crashing to 85. A place on the chart to pay attention.

 

 

Strategy and Tactics – Tilting bearish

No changes.  Still leaning short. Long  long gold and gold miners; long marine shippers

Positioning Update: Short IWM , repositioned in Apr 24 $121P;  Long GLD May 160 C. and  GLD May 165C ;  Long GDX  May 31C.; long DHT Jun $8 calls

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

 

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