Daily Profit Compass May 27

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Tickers discussed: SPY QQQ IWM  DXPE  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

Grant – Profile in Courage

I have been watching the History Channel’s 3 part documentary on GRANT.  If you’ve a lover of biography and history, you’ll appreciate watching this and digging into Grant. I am not a voracious reader but when I do read, its often about titan’s of industry or other famous historical figures. So many come from nothing, then face withering failures yet manage to overcome all odds to become great. Grant fits that mold.  Observers highlight his “quiet confidence” and  ability to see things clearly in the chaos of battle and the fog of war.  As I watched, I saw great parallels with trading.  I plan to dive deeper into Grant.  I read Ron Chernow’s biography of J.D Rockefeller which was great.  In 2017, Chernow came out with his book on Grant. I think I will learn a lot and enjoy reading up on Grant.

P.S.  When you’re having what you think is a really bad day, think of Grant surveying the battlefield where 25,000 of his guys were slaughtered on a single afternoon. Your day probably won’t seem so terrible after that.

Earnings

THe season is winding down, but still some names to watch. WDAY, ADSK, NTNX, TOLL, COST, OKTA , ULTA, VEEV among others

 

News Flow

  • EU plans $823B stimulus package; Largarde says EU closer to worst case estimates
  • Stocks continue to rally; futures up 1%; small caps rockin
  • In Brazil, Covid runs wild as cases soar
  • SpaceX set to launch first manned flight today
  • HTZ joins parade of paying exec’s big bonuses just prior to filing for BK.  Occupy Wall Street 2 behaviors persist.
  • Dimon proclaims $JPM a ‘”valuable asset”; gets 7% pop for the effort

 

Sector Summary

You can really see the rotation out of prior winners toward the recent laggards.

 

Graphics to think about ( Courtesy of themarketear.com )

 

Market remains Relentless as Gaps continue to pile up

The market continued higher overnight largely negating yesterday’s soggy action. Yesterday we saw a full gap fill on the Q’s and a close below $300 on SPY.  IWM was not able to take out $140 but remained resilient as traders flocked to banks and cyclicals which are the strong suit of IWM.  To see small caps up 2% this morning and SPY up 1% shouldn’t be surprising given that most of the recent gains have been overnight, but still seems to amaze. QQQ is set to lag at the open but still up 0.50% after testing a key level yesterday. Today, nothing to do but trade it and see if these gains stick. No particular reason for them not to aside from backing and filling.  Seems we are in the Gap n Camp mode once again.

 Strategy and Tactics 

  • Seems like the rotation into industrials / financials and other cyclicals is set to continue
  • Watch those FAAMG names and tech in general. They could serve as a piggy bank for sector rotation funds.
  • Lack of any downside follow thru continues to be a bullish factor
  • Tactical shorts ok, but overall bias remains and should continue to be bullish
  • Stay mentally flexible even though your heart may urge you to go “all in”
  • THe gap n go, or  gap n crap scenarios are again possibilities which make the open tricky. Make sure you have a good line to shoot against if taking a position.
  • Keep ratcheting up stops if you have nice runners. Have a plan to get paid.
  • Software group printed some ugly candles yesterday. Watch to see if it was one n done or if they continue to exit the group.

FAAMG Update & Trading Guidance

  • I did a post today detailing the technical posture of the FAAMG’s plus NFLX and NVDA.
  • Collectively, the names are testing first support and thus merit a watchful eye
  • A rotation into cyclicals may accelerate the move as traders withdrawn gains from the “piggy bank” to fund new purchases
  • Find the post HERE 

Charts in Focus

A team member in the trading room brought industrial supplier DXPE to my attention. Nice set up. Price took out the 50ema and not about to take out the last vestige  of volume / price resistance. Huge hole above with lots of room to run, especially if the dash into cyclical names persist.

Index Chart Review

 

SPY 30 min.

QQQ 30 min

IWM 30 min

 

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