Daily Profit Compass October 10

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Tickers discussed: SPY, QQQ, IWM, TLT, USO, VIX, EL, HON, GOOS

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.

Earnings Calendar

Light week of earnings. Big banks get into full swing next week.

Market Observations, Technical Developments, Outlook, and Strategy

Market Recap:

SPY and QQQ were up about 1% on trade optimism. QQQ closed it’s overhead gap while SPY only made it about 1/2 way before falling back. IWM made no progress at all closing it’s OH gap and lagged. A closing sell off brought QQQ back below the downtrend line therefor containing the potential breakout. SPY also closed weakly back below the gap opening.

Because of the big opening surge off the bell we now have sizable gaps below price that are now natural targets to fill. The bottom of these gaps lie at the Tuesday closing lows.

Futures traders got a vol shock last night when the rug got pulled out sparked by news reports had the China delegation planning to leave a day early and after only 1 day of high-level talks. Here is a 15min chart of /NQ futures from last night.

White House sources quickly dissed the reporting as flawed and you can see the subsequent recovery to almost flat this morning.

This is probably a preview of the magnitude of the volatility to expect once “real” news is known about the state of the talks / deal. And remember, the volatility does not need to go down. Good news will likely spike prices the other way with the same magnitude.

We are in a short term downtrend. A close above last Friday’s high would break the downtrend and open the door to moves higher, possibly even to new highs. A break of Tuesday’s low open the door for a test of last week’s lows and possibly the bottom of the August trading range. How price resolves after the real news is known will likely set the near term course for the markets. Be prepared for lots of volatility in-between these ranges with bouts of fake news tweets.

Reduce your exposure to a level you are comfortable with during this higher-vol environment. The market is a continuous stream of opportunities so there is absolutely nothing wrong with going to cash here. There will be money to make next week or whenever you feel comfortable re-entering.

$NYMO and $NAMO Oscillators; Don’t fight $NYMO

The oscillators are in the bottom half of the range but with room to go lower. Readings from these oscillators become valuable at the extremes. down move. Over sold or over bought conditions are often violently corrected.

S&P Leaders

S&P Laggards

Hong Kong News: Relatively Quiet

China News: Waiting on Trade results like we are.

Currency News: Quiet

SAFE HAVENS

Bonds. Price lost support at $144.60 and is now favored for a back touch of $143. Reclaiming $145 would be bullish. Dropping below $143 would be bearish.

I closed my October $143 calls for essentially a scratch trade. Lost a few percent.

$USO Price is carving out a triangle consolidation. Yesterday price popped about $1.25 but then they faded that move to pull price back into the range.

On the $WTIC chart I have the following levels as support. $54.80 / 54.15 / $53.50 / 52.90 / 50.90 ( from the 60m chart )

$GLD and $SLV both remain within their short term down trend channels and therefore no technical changes.

$VIX

Price holding the daily uptrend line but not moving impulsively either way.

LONG VIX October 16 $17 Calls

Strategy Update: Holding existing shorts but will likely not be adding much in the way of short exposure ahead of trade talk results.

ETF Mode 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.

Risk off trades : Gold and Silver seem poised for an up move. The trend in Bond prices is higher but are in a period of consolidation over the past few days just under OH resistance.

$SPY

Swing Traders: Bulls are looking for a close above $293 and bears want a close below $288. Price remains below all averages besides the 200ema so the ema’s are bearishly configured.

SPY 60 min: Below $291.50 I’d be leaning bearish. Above and another run at a gap fill to $293 would be favored. A break below $290 favors a fill of the lower gap to $288.50. A break below $288.50 likely ushers in a fresh wave of selling.

$QQQ Daily

Swing Traders: Price closed the OH gap and completed unfinished business above. A move below Tuesday’s low would open the door for a test of the most recent low and would keep the downtrend in tact. A close above $188 would be bullish and open the door for a chance at making a higher high.

Currently price is below all the key moving averages except the 200ema, so the moving averages remain in a bearish near term configuration.

QQQ 60 min:

Use $186.60 as your pivot point. Below is an open gap to $185.40. As long as price remains above $186.60 I think the bulls are ok; below gets more iffy. A break below Tuesdays low would likely invite more sellers in.

From TA 101. BUY at SUPPORT or on BREAKOUTS. SELL at RESISTANCE or BREAKDOWNs. If you do that and set a tight stop which you honor, you’re well on your way to a good day of trading.

$IWM Daily

For intermediate to long term, Stay bearish; nothing in chart to suggest any change is imminent

Swing Traders: Price remains weak. As long as price is below $147.5, stay bearish. A move above $147.50 favors a gap fill to $149. A break above $149 opens door to $150.50 which is the gateway price to a larger advance.

If you’re already in a swing short, sit tight through the noise. If price takes out $150.50 I’d be looking to cover and reposition because prices above $150.50 would be favored to go higher.

IWM 60 min

There is a gap to fill between $147.50 and $149. $147.50 is the bull / bear toggle. Please also notice the new gap below which extends to Tuesdays low. A break below $147 opens a door to fill that lower gap. Moves back below $146 would be bearish and would target yet another test of the low side of the trading range at $144.50.

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

Trade set ups

GOOS – Objective short against the uptrend line. Earnings in Mid November

$HON Approaching key support at $157.50. Objective, low-risk location for a long try or to be patient for a breakdown.

$EL – $10 gap below to fill. Alarm just below the current level for a heads up on the move.

Open Positions

XOP Dec 20 P for 1.29

VIX October 16th 17 C

SBUX Oct 89 / 84 Put spread at $1.50 – closed at $3 or better

XLE Oct 59.5 P at 1.23 banked 163% and rolled to Oct 56P

XBI oct 77p at 2.12

TLT oct 143 C at 2.15 – closed for 6% loss on break of support

These metals trades are toast 🙁

GDX Oct 30 C at $1.47

WPM Oct 30 C at $1.32

PAAS Oct 18C

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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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Chris Buss

I am a professional full-time trader that has been involved with markets for over 15 years. I use technical analysis to seek out and discover objective long and short swing-trading opportunities. I use options in my trading to leverage these opportunities while defining my risk. I look forward to helping you become the consistently-profitable trader you aim to be!

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