Daily Profit Compass May 5

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Tickers discussed: SPY QQQ IWM  FB AAPL AMZN MSFT GOOGL    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 – 

In your business life, have you ever come across a guy that has like 72 open projects on their desk but none ever seem to get done?  Fixing trading problems can be the same way. Trading has quite a number of intertwined disciplines / activities within it. Finding set ups, reading charts, money management, psychological resilience and strength, executing trades etc.  Whenever we get stuck, we often try to fix everything at once, which of course leads us to frustration and lack of progress.  Take a step back. Break the issues down into component parts. Then methodically work on them one by one until you feel confident you’ve made some progress. Say for instance, you work on your chart sorting algorithms to the point where it is producing a tight list of candidates for you to review. Being able to say you’re done and checking that item off the list will give you a sense of confidence and energy to tackle your next task.

Earnings

 

News Flow

  • Mnuchin to issue $3T in debtTrump ramps rhetoric against China on Corona cover-up
  • Fitch downgrades SBUX to BBB w/ negative outlook
  • $HTZ prepares to file Ch. 11. Gold’s Gym files for BK. $PLNT off 4.5% ;    Sears, JCP, Nieman Marcus on deck for BK
  • $TSN craters on increased costs and decreased throughput; $COST moves to set limits on how much meat each customer is allowed to buy
  • Ackman boosts stake in $QSR to 9.6%
  • CA is the first state to borrow money from the Fed Govt to make unemployment payments ( About $350M )
  • UAL notifies management ranks to expect layoffs of 30% of staff in October ( after the PPP employee hold is lifted )
  • $FDX at least 5 workers have died of Covid in recent weeks.

Lift Off

Running short on time this morning so I will be brief.  Stocks are building on the modest gains from yesterday after the reversal and fill of the overhead gap. Bears have are having this pattern of starting hot n heavy, then fading just as quickly. It’s made for tricky trading unless of course you are simply sitting long and letting the excess liquidity work in your favor. If that is you, then you’re winning. Keep doing what works. If SPY fills its next gap above it will be in a position to make a run for $300.

Below you’ll see a refresh of the FAAMG charts. They have re-assumed leadership. Unless / until these stocks falter, the indexes won’t go down even though under the surface, lesser names are continuing to struggle. That bifurcated market makes for some tricky trading. Let’s see how this resurgence unfolds. For now, bulls continue to plow ahead gobbling up the losses from last week’s selling.

Sector Summary

Just like that, traders coming back to FAAMG like moths to a flame. Every baby dip is a dip to buy mode.  Energy continues it’s rebound but tech generally led the day.  Financials and Industrials lagged.

Wave 2 DATA

5/5 Redbook / PMI Services / Non-MFG ISM / 

5/6 Mortgage Applications / ADP employment /

5/9 Challenger Job cuts / Initial jobless claims / Productivity & Costs

5/10  April Jobs Print

Strategy and Tactics 

THe market moves forced me to cover ES and QQQ shorts. Also the SMH short position was stopped out quickly yesterday afternoon. Sticking with the XLF position as financials remain very weak.  Need to re-evaluate gold and GDX with option expiration a week form Friday ( May 15 )  I will update you with my thoughts.

Positioning Update:     XLF May 22P Long GLD May 160 C. and  GLD May 165C ;  Rolled GDX  May 31C to May 35C ; long DHT Jun $8 calls;

Charts in Focus – FAAMG Refresh

$FB

It’s not often a move into a big gap is reversed, but that is what happened here. Prices above $200 are bullish. A break above $210 opens up another leg higher.

$AAPL

Price held multiple tests of $287.50. Prices are bullish above that level. Although some resistance may be seen from the uptrend line, price has a relatively open path to $300. Above $300 opens the door to a leg higher

$AMZN

Despite a look below, price ultimately held the gap. Prices above $2282 are bullish. OH resistance comes in at $2375. All things considered, a pretty tight long set up against $2282 with a target of $2450.

$MSFT

Trader’s can be long against $179 if price pops that level. Place your stop just below.

$GOOGL

The uptrend line contained the pullback. With a move above $1325 price is likely to find $1359. A move above $1360 opens up a fresh leg higher.

Index Chart Review

The reversal off the lows yesterday at the open, combined with the fill of the overhead gap and nearly 1% premarket advance it seems as though the bulls have re-asserted themselves. So for the time being at least bulls are in short term control. That said, there is more work to be done to negate the prior damage done during the last episode of selling.  Remember that the latest rejection for SPY was at the 61.8% Fib level and key resistance at 295. If price were to pop 295, it should make 300 pretty fast and a new leg higher would be underway.

SPY 2 hr

SPY 30 min.

QQQ 2 hr 

QQQ 30 min

IWM 2 hr

Price is sitting at $133 in the premarket, close to the $132 gap support level. That is a troubling sign. Be hyper aware. Below $132 you need to be out if long. A move to $130 or full gap fill to $129 would be favored on a break below $132.

IWM 30 min

 

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