Daily Profit Compass November 1

Tickers discussed:  SPY, QQQ, IWM, TLT, USO, NKE, GLD, GDX, BWA, LKQ

The Daily Profit Compass  provides the stock market outlook 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.

Earnings Calendar

Market Observations, Technical Developments, Outlook,  and Strategy

Jobs Friday

Thursday trading was soggy on the equity front as traders considered a cancelled APAC meeting in Chile where the Phase 1 trade agreement was supposed to be signed coupled with China messaging that a long-term trade deal with the US was unlikely.  Frankly I was surprised markets did not move more on the news.

We are on the downhill side of the earnings bonanza with all of the FAAMG names having reported.  AMZN and GOOGL remain soggy while AAPL, FB and MSFT holding bids for the most part.

Interesting that while equities have held their bids since the FOMC meeting, gold and TLT have moved impulsively higher. While not unprecedented, interesting that risk-off asset classes are moving higher.   I opened starter longs in TLT and GDX.

Falling rates put a damper on financials with KRE flashing a failed breakout along with individual bank names being weak.

Jobs report due out at 8.30. I think 85000 is consensus. Data may be noisy with GM strike.  Also ISM index comes out 10am

Pre-market Movers

ANET, PINS and CAR all being hit hard after earnings.  May offer good intra-day trading ops. If that isn’t your thing, mark the day range for second day / range break trade next week.   PINS in particular is interesting as price is below the IPO price.   Everyone who ever bought stock is underwater.  It will need to see a whole new rotation of buyers in order to advance.  So many of the recent IPO’s are in the same situation.

Strategy Update:   Maintain bullish bias.  I’ve stated on the charts that nothing bad can happen above $301 on SPY or $194 on the Q’s. THose were the breakout levels.   I think its prudent to continue to ratchet up stops and not sit complacently by. If you’re in options, continue to roll up and out regularly harvesting profits and staying long.  I see pros do this all the time. It is one of the powerful features of options to be able to do this.  Take advantage of it.

Sector ETF’s for Earnings Season

If you have a sector you are particularly interested in or have an opinion on, seek out a liquid ETF if you want to play during earnings season. Much better than dart throws at specific companies where you will often lose.  Look to trade a basket.  In your search, make sure you understand if the ETF is cap weighted or equal weight.  For instance, $XRT is equal weighted retail, while $XLY is cap weighted and therefore dominated by AMZN and a couple other names being 50% on the index.

$TLT Bonds

Price held key support and has moved impulsively higher after the FOMC announcement.  Traders apparently not buying the Powell pause.  I opened a started position in TLT Dec 143C.  Looking for some follow through in the weeks ahead.

$USO  Nice illustration of the 50% Fib retracement zone containing the kick back rally to the penny. Now price heading down. Not in the trade but I think price finds $10.71 or close to it as a double bottom test. 

$UUP  US Dollar Tracking ETF

THe USD fell from its long-standing uptrend and has now completed an often seen technical move to backtest the breakdown and subsequently roll over. If this is the beginning of a major trend change it would be very supportive of EEM, precious metals and the commodity complex as a whole. 

$GLD – Weekly

Beautiful bull flag formed on the weekly. A breakout from the flag projects a measured move toward $170 at or near key resistance.  If the USD continues to fall, it should provide a tailwind.

$GDX – Gold Miners Daily

Price has broken above DT resistance, come back to test the breakout, and is now advancing.  Very good chance of a follow through and move higher. Yesterday I opened a starter position in GDX Jan 28C.  Not trying to micro manage it; just going to give it time to work.

SPY Daily – No Changes

Swing Traders.  Above $301 and bulls remain in control. Swing traders can stay long and move stops up.   Moves back below $301 would be bearish developments. A breakout above $304 targets $306.

$SPY 60 minute chart

$2 wide trading range projects a $2 move above or below the box on a breakout or breakdown.  Nimble traders can try to game the moves inside the box by selling $304 and buying $302 but it will be choppy.

Bear Set up:  Bulls are in control, but technically speaking its objective to try and short $304 and a break below $302.  

Bull Set up:   Stay long against $302; a break below favors a backtest of $301 where I’d expect bulls will be buying.  Also buy a breakout of $304 with an eye on $306 as the next OH target.

$QQQ Daily

Price moving higher inside a large rising wedge.  THings remain bullish until price breaks below the dark blue uptrend line off the June lows.  That said, keep in mind the marginal new highs come with bearish divergences that keep being extended.  A price break above the red OH resistance line would likely burn through the divergences and open the door to much higher prices.

Swing Traders.  Pull backs to support are places where you can buy with a tight stop below.  The target move from the consolidation area has been achieved. A back test of $194 that holds would be a place to add to or start a new long position.  Note this is a divergent high as PPO is lower when price is higher.  THat said, no sell signals exist. Nothing bad can happen if price remains above $194.

QQQ 60 min

Price has carved out a $2 trading range between $195.50 and $197.50.  THis implies a $2 move in either direction on a move outside the box.  Inside the $2 box will be choppy but wide enough for traders to buy support and sell resistance.  A move below the bold blue uptrend line would put price on a 60min sell signal.

Bear Set up:   Sell $197.50 until that level has been taken out.  Add to short on a break below $195.50 or on a break of the dark blue uptrend line.Keep in mind bulls have the ball and until the uptrend line is broken, the path of least resistance is higher.

Bull Set up:   Buy support at $195.50 or on a touch and hold of the uptrend line. Add or establish a new long on a breakout of $197.50 and look for $199.50 measured move target.  As stated above, the path of least resistance is higher until the 60m uptrend line is broken

$IWM  Daily 

Price  was rejected at the top of the range at key resistance and has had a nominal pull back. If SPY and QQQ remain strong, IWM will likely hold its bid. It remains to be seen however if price has the horsepower to break through  the wall at key OH resistance at $157.50 – $158.50.  Clearing $158.50 would be a big technical event and quite possibly be the best opportunity of the indexes.  $170ish was the prior high from 2018. A breakout would open the door for a $12 catch up trade.

Swing Traders.   $155 is the daily pivot.  Anything above is constructive and prices below, not so much.   Prices below $153.50 are outright bearish.  The over head target is  $157. 50

$IWM 60 minute

Price took a look inside the prior trading range but then closed above it

Bear Set up:  Objective shorting locations: a rejection at $156.50, a drop back below $155, on a break below $153.50

Bull Set up:  Stay or get long against $155. Objective places to add would be above $156.50 and above $158.50.   $153.50 is the line in the sand for longs. You dont want to see price drop below this level.

**************************  TRADES **********************************

Opened small starter positions in

GDX Jan 28C At $1.53

TLT Dec 143C at $1.54

Trade set ups

$NKE

Watch price as it sits on key support.  If you’re a bull, this is where you buy with both hands with a tight stop.  If you’re in bear camp, you sit and wait for a price break below support.

 

$DJUSAT – Auto Parts

2 Auto parts names breaking out yesterday.

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Notes:

The charts are and levels are provided as well-informed guidelines. That said, please be aware that exogenous events like surprise tariffs or other events can easily move price through support / resistance zones.

Also, set you stops according to your own risk tolerance. The ones I have provided are to be used only as a guide. The most important aspect of your stop is to honor them. Some trades work, some don’t. Honoring your stop will ensure your loss on a failed trade will be minimal.

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