Tickers discussed: SPY, QQQ, IWM, TLT, USO, BYND, CSX, GRMN, CMG, PII, XOP, NOV
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.
GAPS
SYK, NSP, UAA secnd day plays / bracket trade ideas.
Earnings Calendar
$RNG was up $15 on it’s report AH last night which was a contrast with UBER, SHAK, TNDM and MAR whom all got smacked around to varying degrees after their reports. All good names to track for either second day plays for tomorrow or for the more adventurous and nimble, day -trading ops today on moves outside the opening range.
Market Observations, Technical Developments, Outlook, and Strategy
The Rally Monkey
The indexes all advanced yesterday as the market is seemingly unconcerned with anything around it. Hell, even Hong Kong is at 3 month highs as it prints economic numbers consistent with data from the depths of the financial crisis in 2008. As I discussed last week in “World poised for a breakout ” markets across the globe are breaking out.
Here in our markets, energy, industrials and financials led while interest rate sensitive sectors lagged. CFRA came out with a sweeping downgrade for utilities which brought the spotlight to how much this sector has run.
In other news, $MCD lost its star CEO and its Head of HR which caused a stock already in decline to go down faster. $UAA disclosed on it’s earnings call that its been under investigation for 2 years for accounting irregularities. Thanks for the heads up Plank. LOL
Wall of Worry
These overnight gaps higher followed by zero price discovery during the day exhibited by ultra low volume and narrow are a bit unsettling. This advance has been built upon a series of gaps that all remain unfilled and has left the technical structure inherently unstable. These gaps will become magnets when the eventual correction comes. Please understand also, that 99% of the bears have left the building. When the powers that be finally pull the trap door, there wont be any bears below to buy ( close positions ). You could very well see some out-sized red bars. BUT no sell signals yet, so we climb the wall of worry as overall market fear turns to greed.
FOMO CALL BUYING
Another stone in the wall of worry is my PUT / Call extreme-o-meter. It too is flashing yellow. Notice the big call-buying spike yesterday. Higher than anything in 2019. They’re sucking every last bull into the boat just as every bear has given up. Something to think about on the wall of worry. The fact that the spike was higher than anything this year is notable
Strategy Update: Maintain bullish bias while keeping your head on a swivel. Nothing bad can happen unless a backtest of the breakout at SPY $301 and QQQ $194 fail. And we have not even come close to back testing those 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.
Earnings Season
Lots of Bracket trade set ups for second day trades out of the earnings induced gaps. Also, there will be tons of retail earnings coming on the back half of the season. $XRT is a great way to play if you have a bias and want to hold through the reporting period for these retail names.
$TLT Bonds
Yields are backing up modestly. Price needs to take out the daily pivot at $141.17 to clear a path higher. I am holding DEC 143C but losing 🙁
$WTIC Price approaching DT resistance. A breakout there would / should spark a major rally. KEY spot IMO. A smack down rejection would likely hurt the emerging energy rally. Oil inventories tomorrow at 10.30am usually provides a directional move.
$SPY Daily
Swing Traders. Above $301 and bulls remain in control. Swing traders can stay long and move stops up. I’d consider $304.75 a tight stop, but the real test will be on a back test of the breakout at $301. If the rally is for real, there should be a boatload of buyers at that level ready to BTD.
Bottom line, have a long bias and a short leash. THe dark blue uptrend line off the October lows provides a good reference point. Above ok for bulls, below and it becomes a yellow flag. Below $304 and we’ll probably $301 quickly.
$SPY 60 minute chart
Bear Set up: Bulls are in control and breakouts are bullish not bearish. Bearish trades should revolve around the gap fills while price is above the brown uptrend line. Below the brown line begins to favor lower prices especially if the gap at $304.74 fills.
Bull Set up: Maintain a long bias against the brown uptrend line. Below it, double check your risk tolerance. Bulls ultimate line in the sand is $301. THat has to hold on any back test to keep the break out valid.
$QQQ Daily -Breakout
Swing Traders. Spinning top doji after a long up-swing is not a confident look. A red candle today would favor a conclusion of a reversal however minor. Traders can remain confidently long above the dark blue uptrend line. Below it gets more iffy, but nothing bad can happen with price above $194. A back-test of $194 should bring buyers in off the street if the breakout is real.
Maintain long bias as no sell signals exist.
QQQ 60 min
Bear Set up: Above the blue uptrend line the bulls are in full control. Focus short ideas on gap fill opportunities. Below the uptrend line bears can be more aggressive w/ tight stops above. While reversals can happen at any time for any reason or no reason, I expect $194 to be back tested.
Bull Set up: Not much to do except stay long against the blue uptrend line and continue to ratchet up stops. If you have an inventory of long positions you want to keep, you can use tactical shorts on downside gap fills to hedge out some / all of those potential losses. Simply know your gap entry locations and exit targets.
$IWM Daily – At Resistance
Price is at the top of the range at a level that has contained price for a year. A break above $160 with a hold opens the door to a run at $175ish which was the prior high in 2018.
Swing Traders. Stay long against $157.50 and the blue uptrend line. Below $157.50 and I’d be closing out longs and possibly flipping short as moving back into the meat of the trading range would be bearish.
$IWM 60 minute –
Bear Set up: Objective shorting locations would be a rejection at OH resistance, on a gap entry from above, or on a break back below $157.50.
Bull Set up: Stay long from lower levels against $157.50. Those with no position should wait for a move above $160, then get long.
************************** TRADES **********************************
Trade set ups
PII – Polaris is flagging atop support. A move above $102.50 sends it on its way toward the measured move target. The recreational Products group has been hot. Other names: $BC / $WGO / $THO
$GRMN
Nice Bracket trade set up. Blue sky above $96, $5 gap below $93. “Go with” price on a break either above or below the range.
$CMG
It hasnt been an easy trade, none are, but I see this bound for a 200ema test at $720. Technicals aside, money coming out of restaurants, and the valuation here is absurd which is probably also having an effect. I been getting short near the open and exiting at the close. Options are expensive and a bit outside my comfort zone. Being conservative and not willing to take over night risk
Restaurants: Been pounding the table for weeks. WING / SBUX / SHAK / MCD / DNKN money continues to come out.
$NOV – National Oilwell Varco
Alarm $24.50 for a breakout . I like this long if it can take out lateral resistance and the 200ema with one shot.
$XOP
Progressing off the double bottom. OH resistance coming up, then the 200ema. Good money to be made here if oil / energy reflation trade continues. Indicators supporting the advance. No divergences present
$CSX
Long idea off to a good start. Target = $76. Exit there when / if it gets there.
$BYND
On a break below yesterday’s close, get short for a move to $65 as T1. Good chance this round trips to IPO price at $45 at T2
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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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