Daily Profit Compass April 8

Tickers discussed: SPY QQQ IWM XRT GLD   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.

Trader’s Couch :  Periodically reassess and upgrade your friends

 

Every once in a while it makes sense to evaluate your circle of friends. Are they lifting you up or tearing you down? Do they make investments of time and energy in you or does it always seem to be the other way around?  At a certain point it may be time for an upgrade.

Earnings

  • News Flow

  • UK P.M. Johnson stable but still in ICU
  • EU talks on unified corona relief package fails
  • As Wuhan re-opens, people leave in droves
  • Banks blame money laundering and “know your customer rules” for snarling relief aid for SME’s
  • Team Trump plans to reopen economy hinges on testing
  • $ZM sued for fraud over security and privacy lapses

Gap n Crap

After piling on a 3.3% gap up to the 7% moonshot on Monday, folks were feeling pretty optimistic. But price ran up against stiff overhead fib and lateral resistance, then rolled over for a complete fade of the move and a gap fill. It is pretty bearish price action when you see a big move faded 100%. The next couple of days should be pretty important for the broad markets. Will there be any appetite for risk heading into a 3-day weekend and a potentially horrific initial claims print tomorrow morning?  So now we have established a trading range between the March low at SPY 220 and the recent high at $275. As a rough measure of who is control, key off of SPY $245….nearly half way between the high and the low of the range and a location that has seen a lot of trading activity. So as it stands now, the bulls still have the ball despite yesterday’s poor price action.  Going forward, price will be knocked around by  COVID headlines and “Wave 2” data points as they reveal themselves. While uni-directional moves are nice and easier to trade, I am expecting a choppy tape over the next several weeks. After Easter, we will be heading into earnings season where more color will be added by companies.

 

Wave 2 DATA

4/8 Mortgage applications/ oil inventory / FOMC minutes

4/9 Jobless claims / Consumer sentiment

4/10 Markets closed for Good Friday

Strategy and Tactics – No new changes

Today we should learn if there are more buyers willing to step into this “new bull market” or if the “bear market rally” has run it’s course. Bullish or bearish arguments to explain the price action are easy to make. Let’s leave it at this…..Until I see a clear rejection at a particular resistance level and the the beginnings of a reversal, the path of least resistance is higher. Enjoy it and take advantage of it for sure, but be careful about getting emotionally attached. The job of a bear market rally is to rid the market of shorts and convince you beyond a shadow of a doubt that the advance is the real deal.  But for now, the trend is higher and the right side of the trade is to be long. Remain nimble and fluid in both your thinking and positioning.

Note:  NYMO is at 57.   At 60 the oscillator enters the over-bought zone. As we’ve discussed, above 60 is cautionary for bulls. If it pushes toward 80+ the yellow light turns to red.

$XRT – Equal Weight Retail

This retail ETF has carved out a $5 trading range between $27 – $32.50.   Currently price is at $31 near the top of the range.  I have real doubts this one is going to power higher given the economic backdrop.  I favor a move back toward the bottom of the box near $27.   Getting it yesterday on a touch of the top of the box would have been a perfect short entry but missed it.  Traders can either alarm $32 as a location to re-focus for a potential short entry, or take it now if you like it.  I’d look out to the May options chain in order to capture some earnings reports. Set a stop at $32.60 or so depending on your risk tolerance.

$GLD 60 min

Constructive price action as near term support held and price finished with a strong closing bar.

Index Chart Review

Today it will be interesting just how much risk appetite is out there ahead of the initial claims print tomorrow morning and the 3-day weekend that begins Friday. It will also be interesting to see if the bears have any follow through power after yesterday’s sell off into the close.

 

SPY 2 hour

SPY 30 min.

QQQ 2 hour 

QQQ 30 min

IWM 2 hour

IWM 30 min

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