Daily Profit Compass May 6

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Tickers discussed: SPY QQQ IWM  SPLK OKTA NEM     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 –  Will Return

Earnings

 

News Flow

  • Trump pivots to Phase 2 as re-openings take priority over CoVid mortality concerns.
  • Chinese Ambassador to US urges an end to the blame game.
  • Hospitals are losing $50B a month due to CoVid fall-out; Insurers on the other hand are fine
  • Laborers in the US Meat packing industry are quitting rather than face CoVid-riddled workplaces
  • Layoffs morphing from temporary to permanent as companies prepare for the long road back – Bloomberg
  • India prints a catastrophic PMI of 5.4 as economy contracts over 15%
  • $NCLH prices a $400M equity offering at $11 to raise some cash as it fights for survival.
  • $JWN permanently closing 16 stores as it prepares to re-open
  • $DIS scraps divvy as CoVid Digs in. Shanghai Disney set to open May 11

Mixed Massages

Overnight US markets have rallied back from yesterday’s late afternoon rug-pull to recapture most of those losses.  The “chop at the top ”  price action over the past 2-3 weeks has had the effect of frustrating both bulls and bears alike. 2-3 day sell offs are met with 2-3 day rips. Uber nimble day traders are probably having a ball. Longer-term traders probably don’t mind as they are in it for the long haul. But for most in-between, it’s been a tough environment. The market continues to look past horrid economic data as it focuses instead on the positives as states begin to re-open.  From a technical standpoint, we’re at an important level.  SPY sits near the 61.8% Fib zone while QQQ is already above and just a few percent off the ATH’s which is remarkable in itself. We may find ourselves in this stalemate environment for a while as hope battles fear with neither making progress.  We will have a big data point on Friday as the April jobs report is posted.   Then again, who is going to be surprised by a horrible number?

In this type of environment selling into strength near resistance and buying into weakness near support has been a strategy that works in a choppy tape like we’ve had in recent weeks.

Sector Summary

Surprise, Surprise, Healthcare and Technology continue to lead.  Financials continue to lag.

Wave 2 DATA

5/6 Mortgage Applications / ADP employment /

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

5/10  April Jobs Print

Strategy and Tactics 

Light and nimble.  Working some intra-day swings when the set up seems compelling. Forgot to mention yesterday that i took a small position in LUV Jun 25P.  Very small position on the break lower from the consolidation range.

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;

FAAMG Update

These names have become the market. I’m going to make them a permanent part of the note so we can track and trade them.

  • $FB – Price testing $210. Above $210 is a long; only $15 off the ATH
  • $AAPL – Ran to $300 as discussed in yesterday’s note before late day pull back. It’s a long above $300.
  • $AMZN – Chopping in a range between $2275 and $2450. Traders can be long against the bottom of the box. Big gap below warrants attention on a break below $2275
  • $MSFT – Late day rug pull gives us another bite at the apple at $180.  Above $180, stay long or get long if you want in.  ATH’s a stone’s throw away.
  • $GOOGL – Broke above $1360 but pulled back late day. I like this long above $1360

Charts in Focus 

2 software names and a gold miner. All long ideas with pretty tight set ups.

$OKTA

We did not get the pull back we wanted, but I still like this long right here. Earnings are May 28. Plenty of time for a 2 1/2 week run.  I would not hold thru Earnings.

 

$SPLK

Price popped above a nice level of resistance which becomes support. I like it against $140.

$NEM

Emerging from a big, beautiful bull flag that points to a target in the $80’s. Nice little consolidation to cool off the tires. I think it’s time to run again. Like it long against $64  or the 8ema if you can give it a little extra breathing room.

 

Index Chart Review

While yesterday’s late day rug-pull provided some excitement, it really did not change the technical picture all that much especially considering that as I write this futures have recaptured the bulk of those losses. Stay nimble and fluid in your positioning and thinking.  Healthcare and technology continue to be strong so if you’re looking for longs, those seem to be fertile sectors. Those that want to hunt for short ideas, you wont have to look too far in the banking / financial sector. They simply can’t get going, even on boldly green days they do next to nothing.

SPY 2 hr

SPY 30 min.

QQQ 2 hr 

QQQ 30 min

IWM 2 hr

For some reason I lost all of my prior annotations, so here is a fresh look. Boiled down to its essence, bulls are fine above $125. Below it gets harder.

IWM 30 min

 

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