Tickers discussed: SPY, QQQ, IWM, TLT, USO, DIS, XLY, XLU, HAS
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.
Quote of the Day
Taking ownership of any aspect of your life is a powerful first step to change. If you’re not having the success you want in your trading, simply stop. Own the mistakes and misfires. Dissect your process if you have one. If upon inspection you don’t have a reliable process, create one. Nothing happens until you first own the problem. From there, possibilities open up.
Earnings Calendar
$DHI, $CRON, and $AAP headline morning earnings with $TLRY, $SWKS after the bell.
Market Observations, Technical Developments, Outlook, and Strategy
Trump Talks
The major indexes started on a weak note with a small gap down to open the session. The entire rest of the day, literally, was spent on an incremental climb to close the opening gap. With the bond market closed, equities had a free hall-pass if you will.
$BA was the main source of strength for the DOW and industrials being up 4.55%. The news was that officials think the 737 Max may be back in service earlier than expected. The move seemed outsized for the news, but what do I know? Traders are voting with their dollars. AAPL also continued its run being up 0.8%.
Today Disney + is live so everyone will be on the edge of their seats for early sub numbers. While not a close observer of the space, the offering seems compelling. Combined with the other streamers it has me considering cutting the cord.
Hong Kong was rocked again with protests yesterday with more tear gas and violence in and around the financial district. Many schools and businesses were forced to close. While Island Governor Carrie Lam was given a show of support by Xi, I cant help thinking something big is about to happen. Protesters have kept up the pressure for 6 months with no let up at all. They are not going away.
President Trump is speaking at the Economic Club of New York today and is anticipated to take the stage at noon. Market participants will be parsing every word for clues on China trade and even possible delay of auto tariffs on EU which were supposed to be announced this week. Be ready for a market moving event.
Strategy Update: No changes. In my opinion, now isnt the time to mash the gas pedal. While there are no sell signals and therefore no reason to close out whatever long positions you may have, that also does not mean to add meaningful new longs. The near-term upside seems very limited given where we are both in terms of price and sentiment. I think the upside is limited. Therefore…
- Maintain bullish bias while keeping your head on a swivel.
- Set tight stops depending on your time frame.
- Keep some dry powder ready; a back test that holds would be a great place to anchor new longs.
- Be aware of the yellow flags; ( low volume climb, ultra low volatility, excessive bull sentiment, excessive call buying ) collectively they simply mean to be careful.
- Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails
- Nimble, active traders can hunt for momentum plays intra-day with the plan to close at the bell.
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 in 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
Sellers have been in control since the FOMC speech. With price in an air pocket, I expect a move to $133ish where there is decent support. Price needs to recapture $137.25 as a first step to regain it’s upward bias.
$GLD Gold’s reputation as a heart-breaker remains in tact as the promising breakout from the bull flag fails. Sellers in control here short term. $136 is definitely in the cards as a possible support level to hold. Longer-term uptrend still in tact but momentum behind the bull run definitely has faded.
$SPY Daily –
Price continues its melt up riding both the steep uptrend line and the 8ema. Until the daily trend line breaks and price moves below the 8ema, not a whole lot to be bearish about. Any shorting should be done strictly in a tactical manner since no longer term sell signals exist.Bulls are in control.
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 find $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 while price is above $307.10. A move below 307.10 would favor a move to test the gap at 304.75.
$QQQ Daily – Price continues to levitate and work its way higher as it walks along the uptrend line and the 8ema in pink. . As long as price stays above uptrend line, higher prices are expected.
Swing Traders. Traders can remain confidently long above the dark blue uptrend line and / or the 8ema. 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 $199.85 would favor a price move lower to $199. Then $197.63 comes into focus for a gap test.
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 grinding away within a $2 wide trading range between $158 and $160. A move either above or below the box implies a $2 measured move. Nimble traders are welcomed to try to trade within the box by shorting resistance and buying support.
Swing Traders. Stay long against $158 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 – New buysignal would come on a breakout of $160 while a sell signal would come on a break below $158. Everything else in between is noise.
Bear Set up: Objective shorting locations would be a rejection at OH resistance or on a break below $158.
Bull Set up: Stay long from lower levels against $158. Those with no position should wait for a move above $160, then get long. 
************************** TRADES **********************************
Trade set ups
$XLY Weekly – This offensive sector has been lagging, mostly the result of AMZN trading on the soggy side and doing nothing as the market advances. Alarm $123.50 for a potential breakout but also watch for continued softness. THis sector will have a hard time if AMZN doesnt go higher. It is roughly 23-25% of this index.
$XLU – For those in XLU puts, continue to hold them and look for $60.50 where I’d close them out and wait for a bounce. That said, if price does break below $60.50 I would expect a deeper corrective move.
$HAS Hanging around near the lows with a sizable gap below $94. Please alarm for potential trading op.
$DIS Nice Bracket trade set up. Alarm the 2 day range. Disney + launch may rocket stock higher or potentially be a sell the news event.
Please note…..keep in mind my commentary from above. We dont have any broad market sell signals but we dont have the marginal new buyer either. Stay nimble and flexible. Maintain whatever long exposure you’re comfortable with but with a tight leash / stop.
Since I have no idea what you have, I am offering ideas and set ups that look promising to me. Be selective and take what looks good to you and in the context of your existing positions.
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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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