Daily Profit Compass April 29

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Tickers discussed: SPY QQQ IWM XLE SBUX   Strategy & Tactics

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.

Trader’s Couch

Self Image influences performance

” You cannot outperform your self-image” 

Dennis Conner  America’s Cup skipper

How you see yourself greatly influences how you perform. Do you see yourself as a cool operator in the face of a stiff challenge or as someone who often chokes under pressure? Guess what….we often perform exactly in-line with our expectations for ourselves. That is why hugely successful athletes and business people often are supremely confident, even arrogant about their capabilities.

These feelings of self-image are built over a long period of time in our formidable years. If you’re someone who has, for whatever reason, deep-seated doubts about your own capabilities, it will take a good deal of work to de-construct that mindset ( Tear down the prison )  Performing well in a stressful endeavor such as trading requires a positive mindset. It influences everything.  The more we look, the more we discover, how important “work in front of the mirror” is to our success. 

Earnings

MSFT / FB Wednesday AMC   AAPL / AMZN Thursday AMC   plus lots of other notable names this week.

News Flow

  • Trump orders meat processors to remain open; Union slams decision
  • US CoVid deaths top Vietnam casualties at 58,000; NY Covid deaths stands at 9x  9/11 losses
  • FOMC Announcement at 2pm. No rate change anticipated. All about Commentary centered on accommodation and future relief program. Listen for hints at ETF and equity purchases.
  • Suicide death of healthy, outgoing NYC ER front – line doctor Lorna Breen puts a fine point on the stress and damage caused by CoVid
  • Australia stokes China tensions as it calls for virus probe
  • Colleges ponder if a fall re-opening will even be possible.

FOMC Day

The FOMC announcement at 2pm plus the wait for FB / MSFT earnings after the bell will likely mute price action during morning trade. Chairman Powell is expected to reassure the market that the Fed will continue to provide effectively unlimited liquidity in the time of global economic turmoil caused by the pandemic. Global Wall Street will be interested in the Chair’s comments regarding the possibility of negative rates, yield control programs, High-yield bond purchases and the possibility of other ETF and equity purchases.  Outright purchases of  ETF’s and equities is at the moment illegal, but Fed officials have already stepped around the rules by buying junk bond rated debt through a special purpose vehicle established in conjunction with the US Treasury. So it will be interesting to see if Chairman Powell categorically dismisses such speculation or simply leaves it open-ended by stating that such actions are outside of the Fed’s purview for now.

Given the historic bounce from equities off the lows, there is not a whole lot of incentive for Powell to go off the deep end on his accommodation rhetoric. A better prescription is likely to be to simply provide soothing words and keep this thing on a rail.  Any mention that some credit risk default will be a natural outcome of the global lock down that could spook equity markets badly after a strong rally that they have put in over the past few weeks.  The wild-card is Powell himself.  Although recent meetings have been better, if he wanders off script, he is prone to gaffs.  If Powell remains steady and advances with a positive tone, he should do fine.

If there are fireworks, a good rule of thumb is that the first move is a fake move. If you’re an active trader, let the dust settle and don’t jump the gun too quick.  Also, FOMC revelations often move gold. We’re long gold and the miners so we have a vested interest in listening and watching carefully to the price action. 

Sector Summary

Lots of profit taking on big tech and cloud names as well as in Healthcare.

 

Wave 2 DATA

Big Day for Data.  GDP and FOMC headline macro while FB / MSFT after the bell headline earnings

4/29  GDP / FOMC Announcement 2pm w/ Presser

4/30 Jobless claims / Personal Income / Employment Cost index / Chicago PMI

5/1 PMI Mfg Index / ISM MFG index / Construction Spending / Rig Count

Charts in Focus

For all the charts on individual names, please check for earnings release dates!!

$XLE

As improbable as it may seem, price is challenging entry into a $5 gap.  On a break above the 50ema at $36.50 a long entry has a strong risk / reward profile.

$SBUX

Price is trading around $77.50 in the pre-market after earnings. . Keep it in focus, we are at an objective level for a short entry against $79.

 

Strategy and Tactics – Neutral / Bullish

Keeping things light as we chop. I thought yesterday was the start of something bigger but did not turn out that way. We will know a lot more after the balance of FAAMG reports and after Jay Powell speaks today.

Positioning Update: I closed my IWM long for a nice win.  Opened a small QQQ May 8 $114 P and smaller yet IWM May 1 $128 P as speculative positions ; Long GLD May 160 C. and  GLD May 165C ;  Rolled GDX  May 31C to May 35C ; long DHT Jun $8 calls; closed the baby TLT May 1 168P for a small loss

Index Chart Review

Although there was some morning drama with the liquidation sell-off from the highs, very little technical damage was done. This is especially true with the after hours bounce off the GOOGL positive earnings reaction.  Watch QQQ closely. Price violated it’s 2 hour uptrend line but with so many near-term catalysts, that trendline can be quickly recovered. Take breakouts and breakdowns with a grain of salt ahead of the FOMC and the rest of the FAAMG names yet to report.

SPY 2 hr

SPY 30 min.

QQQ 2 hr 

QQQ 30 min

IWM 2 hr

IWM 30 min

 

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