Daily Profit Compass January 27

Tickers discussed: SPY QQQ IWM TLT GDX

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:  Will return

 

 

 

 

Earnings Calendar – The week is loaded with Risk and Opportunity

Earnings really ramps up this week and it could not come at a more critical time. Key FAAMG names headline the week along with several marquis names in other sectors. AAPL / AMD / BA / TSLA / MCD / SBUX / MSFT / FB / AMZN / V / XOM / CAT /     Lots of market cap here that will most assuredly move the market one way or another.

Market observations and Strategy

Contagion

Over the weekend everyone was asking one n done or something more.  Now we know.  Contagion within markets rolled across Europe and to our shores overnight with futures pushing 1.75 – 2% losses across the board.  Bond yields are off 6% and oil is down 3.5%.

I’ve been seeing more posts over the weekend and this morning “the flu virus kills more than Corona virus so why is everyone panicky”.     As far as markets are concerned “any excuse will do” when it comes to rips or rug pulls. So dont get all wrapped up “the reason”…focus on price and the key support and resistance levels. We all knew this day was coming, we just did not know when.  Stick to your plan, honor your stops, look for opportunities.

Thoughts for today

  • If you are not already short, be careful about shorting into the hole. If you want to get short, wait for a healthy bounce or a clear break of support before trying an entry.
  • Premiums on options will be elevated today.  If you are already short, creating a spread by selling against your short position will pull in a bunch of premium and stabilize your position against wild swings or swift bounce.
  • Because of elevated premiums, if you enter new positions today, use spreads to lower cost.  Buying straight Puts will be expensive.  Be patient and get a good fill.
  • FAAMG names will still have the ability to lift markets but now the bar is raised higher as sentiment has turned.
  • SPY will trigger a sell signal on the daily charts today as it drops from its uptrend channel.
  • As I write this at 6.15am QQQ is sitting at $218 which is at the confluence of the 20ema, key support, and low side of the channel. A break here would favor a move toward $212.
  • IWM is at gap support at $162.50; a break below brings the gap at $161.25 into play. 
  • Regardless of where we open, mark and be aware of the overhead gap. Don’t put it past these guys to try and fill it.
  • Mark the overnight lows on your platform. Price will usually re-visit the pre-market low in the regular session before deciding on its final destination.

Let’s Dive into the Charts

TLT Longs

Price set to open at $144.  I am in the March $143 calls.   If you are long TLT, at least consider rolling to a higher strike or spreading your position to take advantage of elevated premium. TLT is going higher.

GDX Gold Miners

Price set to open at T1. If you’re long, sit tight. I think this goes higher.  For those looking to enter, wait to see if price can clear T1, then use that line to shoot against with a stop just below.

 

Index Deep Dive.

SPY 60min

Price is testing $322.50 in premarket. A break below favors a test of the gap below at $320.37. Use the levels above as reference points for counter-trend rally targets.

 

SPY Daily

As long as price is below $325, flip your bias to bearish. SPY has a ton of work to do now to look constructive. The logical place to look is for a tag of the 50ema down around $319.  I expect a bounce on the first tag of that level.

SPY Weekly

A weekly close below $325 would open the door to a larger corrective move to the bottom of the channel. Note the lack of structural support below $325.

QQQ 60min Chart

Price bouncing down around $218. THis level could not be more critical. A break below sends price in a $1 gap to $217. Below $218 also would drop price below its daily uptrend channel .

QQQ Daily

A daily close below $218 would trip a sell signal on the daily and thus would favor more downside and a move to tag the 50ema at $212.

QQQ Weekly

The weekly doji at the top of an extended run is a cautionary candle. A red candle this week would favor more downside. A break of the dashed uptrend line around $218 would favor more downside.

IWM 60 min

A move below $162.50 brings the gap below into play. A move below 161.25 favors a gap fill to 160.25 or so.

IWM Daily

At this juncture, price is below the 50ema in the premarket. Moves below $162.50 favor a run to back test the breakout which was at $159. I expect buyers there when and if price makes it that far.

 

IWM Weekly

Until price can break above the prior high and resistance at $170ish, the chart will continue to have that double top look. A weekly close below $162.50 would favor a back test of the breakout around $159. I’d expect bulls to make a stand there at least for a bounce. If you were short, I’d cover at that level, then re-initiate on a break below. If price breaks below the breakout level, then the bottom of the trading range near $143 becomes the technical target.

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