Daily Profit Compass June 23

Tickers discussed: SPY QQQ IWM 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 –  Engaging your Inner Observer

Although many of you have likely already seen me discuss the inner observer through the years, but for the benefit of our many new subscribers I want to introduce the topic. This actually builds on the discussion we’ve been having on Self-Talk.

When we’re having trouble ( or even when we’re not ) a powerful ally you may not be aware of is your inner observer. Engaging your inner observer is one of the most powerful catalysts for change we can employ, and it does not cost a dime. It’s one of the most powerful things you can do is engage.

My old counselor George explained it this way.  Pretend you are hovering in a cloud 3 feet over yourself as a mentor would carefully watch a new student…. carefully making notes, watching for behavioral triggers, logging reactions to those triggers, whispering encouraging words, reminding you about the things we’d discussed before.  During a trading session, my inner observer might have this to say to me.

“OK Chris….you see the emerging set up right? You’ve seen this one before. The stock is in a nice uptrend and is coming in for a halfback pull back into support. You know that is a prime location to anchor a long.  Perfect, yeah, great location for a stop. Look for your targets and mark them. When are earnings?  6 weeks? Maybe we’ll get a pre-earnings run if we’re lucky. Jot down your trade plan. Double check your work; you’re not in a hurry. You almost forgot…..set your alarms.  Be patient, no trigger no trade. I noticed the bid / ask spread is a little wide. You better use a limit order and go for a great fill.  Awesome, you’re in.  Great set up and execution. Now it’s in the hands of the market gods. Let price tell you if you were right.”

Your inner observer will help you with all kinds of situations. He is someone you want to develop as a trusted part of your team.  It may feel a little awkward talking to and observing yourself in this way but I can assure you that once you get to know your inner observer, you wont go anywhere or do anything without him.

More resources and further study:  Engaging your Inner Observer Blog Post Link HERE

FUN FACT:  The Trader’s Couch being at the top of the page isn’t an accident. It’s probably 10x – 100x more important than what ever you’ll find below. Building, then owning, a robust trading psychology is where traders find their durable edge.  In my opinion,  90% of achieving consistent profitability is dictated by trader psychology, not any one particular trading system.  It is also my opinion that 90% of traders spend little if any time on the subject because it’s the hardest work you can do as a trader.  It’s also true 90% of traders fail. Do the math.  Having the best set up / trade in the world isn’t worth a dime if your particular behaviors undercut your performance and execution on a daily basis. 

Earnings

Sector Snap Shot

Tech, tech, and more tech.

News Flow

  • Navarro flip flops on China Trade after Pres. Trump corrals the rouge comment.
  • AMZN launches $2B clean energy fund
  • Wirecard former CEO arrested
  • Euro PMI’s lift sentiment and prices.

Market Snapshots

VIX remains well bid despite advance.

 

Gold and Real Yield.

Navarro Backtrack

Risk assets tumbled hard in Asia overnight as comments by White House advisor on trade Peter Navarro roiled financial markets by saying the China trade deal was “over”.  The sell off was quickly reversed as President Trump quickly corrected Mr. Navarro.  Mr. Navarro then quickly denied his statements  saying that they were taken out of context, although his words carried no ambiguity.

Anyhow, it all turned out to be much ado about nothing as futures returned to green ( like they always do )

Euro and UK PMI’s came out slightly better than expected though failed to crack the 50 boom/bust level. According to Markit in Europe, “The eurozone economic downturn eased markedly for a second successive month in June as lockdowns to prevent the spread of the coronavirus disease 2019 (COVID-19) outbreak were further relaxed, according to provisional PMI® survey data. The month also saw a continued strong improvement in business expectations for the year ahead. “

The shift towards expansion in PMIs added to the recovery flows in early Europe and now the markets will look forward to the US data to see if the momentum has turned in the US industry as well. The forecast calls for about a 10 point rebound from mid 30’s but if the PMI data can print close to 50 equities should like that news and the positive momentum could propel S&P towards 3200 while Nasdaq could set fresh highs above 10200 as the day progresses.

 Strategy and Tactics – Bulls re-emerging

  • Bullish bias longer term with liquidity flood and with bearish bias subsiding. Still choppy but bulls re-emerging
  • Expect daily vol to continue with headline whipsaws and with VIX elevated at 35.
  • Eye’s wide open though trying to keep open and flexible to new data and inputs.
  • Expecting a hi-vol summer with Covid and political headlines whipsawing markets
  • Want to take care on establishing positions with duration. Certainly dont want to load up bullish or bearish positions. Like I said, feels like a dart throw while we are in chop zone.
  • FAAMG – Re-emerging.  FAAMG needs to power through this to open door for general market upside. .
  • I realize its difficult, but don’t lock it on an idea or thesis. Stay open and flexible in your thinking. Let price be our guide. Stay mentally flexible here.

Charts in Focus

$UPWK – Upwork 

After a long consolidation , price made a powerful breakout move supported by strong Call buying in July 15 Calls. PPO set for a bull cross. A break above the prior high at $14 sends thids higher IMO.

$SBUX – Starbuck’s

We had a short idea on this last week with price in the $77 area. Working so far. Now $74 is the key level. A break below is the 2nd chance at an entry. Price is below all the moving averages so upward travel will have lots of resistance. Chart says path of least resistance is lower but a break below $74 would be helpful and help cement the outlook

Index Chart Review

Despite an overnight dip, risk on flows continue.

SPY 2 hour

SPY 30 min

QQQ 2 hour

QQQ 30 min

IWM 2 hour

IWM 30min

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