Daily Profit Compass March 24

Tickers discussed: SPY QQQ IWM  GLD GDX AAPL   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:  Expensive Eights

 

 

 

 

 

In late February, many unfortunate people found out how expensive it was attempting to milk the last 1/8th out of a massive rally. Now it seems just as many want to call the bottom and capture that first 1/8th of an upswing.   Jesse reminds us that the first and last eighths are the most expensive in the world.  100 years later nothing has changed. Keep Jesse’s advice close at hand and at top of mind if you feel yourself slipping into bottom tick delusions of grandeur.

 

Earnings

News Flow

  • The FOMC goes QE Infinity on Everything.
  • Fiscal bazooka relief bill fails another key vote; meanwhile Nancy Pelosi says screw it, I will write my own Bill.
  • Trump waivers on “social distancing” and “destroying the economy to save it” as Fauci and other medical professionals are conspicuously absent from most recent virus presser.
  • Airlines may ground themselves as the economics of 90% capacity reductions make no sense.
  • Mortgage Bonds rattle market in liquidity crunch

Jay’s One Stop Shop for Liquidity

QE Infinity used to be a catch phrase for relentless meddling by the FED as it manipulated markets to keep the asset bubble expanding.  Now QE Infinity is a reality as the FOMC becomes both the buyer and lender of last resort for EVERYTHING. Open -ended and un-bounded best describe these programs.  Need to sell $LQD? No problem, Jay’s a buyer. Need a $35B loan? Call Jay.   Need a Trillion a day in Repo?  Done.    About the only thing left to do is implement yield control across the curve out to 30 years, and become the majority shareholder of Boeing.  I am quite sure the FED’s balance sheet will explode to $10T before this episode is over. I am not saying these programs are bad or not needed, those discussions are above my pay grade. I am simply pointing out the massiveness and open-endedness.  Its the kind of stuff gold bugs have been talking about for 20 years. The ingredients for a $3000 golden cocktail are being stirred.  The market narrative of the day, according to financial media, was that the market was red because the fiscal stimulus package failed another vote.  Sorry; the vote was in the afternoon.  The market started fading the FOMC’s big green spike almost immediately and never looked back. The market is fading the FOMC every single time.

Markets

A green wave of buying washed across Asia, Europe and now here in US markets with nearly all asset classes up 4-5%.  But since we were down 3% yesterday, we sit in the pre-market at exactly the same spot we were yesterday in the premarket.  It will be interesting to see if the fiscal stimulus package is a “sell the news” event or is a catalyst for an upside move.  What was also interesting from yesterday was both the VIX falling AND Equities falling.  You dont often see that.  Maybe a function of fewer hedges or short positions being put on with the perception that the downside is limited. Something to watch.

Wave 2 Data Flow

  • 3/24  Redbook / Flash PMI / Bullard speaks / New Home sales / Richmond Fed / Fiscal Bazooka Bill?
  • 3/25 Durable goods / Home prices / oil inventories
  • 3/26  GDP / Jobless Claims  ( Big Day; Jobless claims may spike 2M ++ ) NatGas inventories
  • 3/27 Personal income / Consumer Sentiment

Index Chart Review

SPY Daily

The key to SPY today is $235. Above sets up for a long; below sets up for what would be a devastating gap back fill to $222.95 which would fade the overnight rally 100%. We were at exactly the same spot yesterday in the pre-market.  I cant say which way it will go but I do know $235 holds the key. Remain flexible and fluid while price leads you to its path.  React swiftly without hesitation if price does something you dont expect.  For instance, if price breaks above $235 then falls back below, either take off your long or get short, but dont hold onto a long idea if price is not confirming it.

SPY 2 hour.

A more granular look at the potential targets if price can breakout above $235 can get some traction.

 

QQQ Daily 

A multi day test of 166-168 looks like a secure low for now. Price set to open just below $180 which is a key spot on the chart. To my eye, $180 is the bull / bear toggle for today.  Above looks like a great place to locate a long. A rejection keeps the door open for a back fill of the sizable gap below.

 

QQQ 2 hour

Above $180 targets $186 and potentially $192.50. Again, below $180 keeps the door open for a gap fill below to yesterday’s close at 170.50

 

IWM Daily

$96 has held multiple times. The declining 8ema may pose some problems at $108 but if price can clear it, then I can see IWM going all the way to $125 if SPY and QQQ are driving higher too. IWM has been leading to the Downside and has already trading well below the Dec 2018 low. I see price at least finding $90 over time. While a kick back rally could bring price all the way to $125 IMO it would be a prime shorting location.

$IWM 2 hour

Granular targets overhead if price can clear $108 and trigger the double bottom with bull divergence.  In a bull market this would be a money set up, but as we’ve seen, bull set ups often fail in bear markets.  Make price confirm everything and dont assume that a beautiful bull set up will actually work. Looks great on paper.

 

 

$GLD Daily

Price popped the 200ema and is now in no man’s land between $140.50 – $149. The chart is well annotated with my thoughts.

 

$GDX Daily

The gold miners were caught in a doom loop as “sell everything” mode ravaged the index. Still way too much intra-day vol to trust it IMO. For gold exposure right here and right now i prefer the metal. That said, if you can pick up GDX at $19 or $20 the downside looks limited. If you did happen to get a cheap fill you could go out 4, 6, or even 9mo with some calls and just tuck it away. If gold does a moonshot, GDX will surely follow and possibly catch up.

 

$AAPL

AAPL and big cap tech in general have held up better than most. If price can power above $240 and clear the 60m DT line, I think price can find $167.50 if a rally breaks out in the broader market.

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