Daily Profit Compass October 15

Tickers discussed:  SPY, QQQ, IWM, TLT, USO,  GLD, SLV, USO, VIX, DRI, CVNA, DE, UBER

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

Market Observations, Technical Developments, Outlook,  and Strategy

Market Recap:

I think I need a creative writing class to make a 30 cent move in SPY and a 2 cent move in QQQ seem exciting so I wont try.  One could look at the day as a nothing burger chalked up to light holiday volume or a digestion day after the big move on Friday.  Doesn’t really matter; at the end of the day price remains where it was at the close on Friday.
All of the technical set ups and potential trading scenarios remain the same. Bulls want to see a move back up toward Friday’s highs while bears want to see the big gaps below to be filled.  If I was biased for a move higher, I’d want that lower gap filled to eliminate the unfinished business below and be able to pile in at $293. We’ll have to see how price behaves and react accordingly.
Market’s Moment of Truth
I think this earnings season will be pivotal for the market.  Nobody is expecting much in terms of the numbers. Maybe the bar is so low that almost anything will be cheered, but one never knows.  The world is still slowing down. A handshake Phase 1 deal wont fix that. So aside from all the commentary, the numbers will matter at the end of the day.  The Fed has re-fired up the QE machine so that is a supportive factor. Technically we are in a wide choppy range. Marginal new highs have been sold and head fake breakdowns have been bought.  It feels like this could be the quarter where price decides to break higher from its box or make another trip lower.
Note: for SPY / QQQ / IWM the trading plans remain the same; no changes. So if you think you’re seeing things, you’re not. Same commentary as yesterday.

Strategy Update:   The environment remains choppy within a wide range and not very conducive to multi -week swing trades.   Remain nimble and flexible in both your thinking and positioning.  If active, short -term trading is not your thing, wait for solid long-term buy or sell signals to emerge and / or trade small if at all.

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 :   Bonds threatening a trend reversal and premarket is up another $1. Dont snooze on TLT.

S&P Leaders

S & P Laggards

Hong Kong News:  City is under a de facto curfew as the subway system shuts down early. The subway has been a focal point for vandals over the past month as they’ve trashed numerous stations forcing closures.

China News:   Just waiting for tweets…….

Currency News:  $USD via UUP broke below a long up trend channel.  Details below.

 SAFE HAVENS

BondsPotential trend change emerging. Price took out DT resistance and recaptured $141 support.  Traders can be long against $141. Exit on anything below $141.  Note the RSI breakout and bull cross on the PPO supporting the move.

 

 

$USO  The oil guys did not like the thought of a fake trade deal.  Price flirted with being off 3% before recovering into the close.  A break below $11 puts $10.71 back on the table. Futures off nearly 2% in this mornings trade.

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   

 $SLV

 

 

$UUP  Price has dropped below a long-standing rising channel initiating a sell signal on this ETF that tracks the $USD.   Dollar bulls need to recapture the trendline to get back on track.

$SPY Daily

No technical changes.  Price consolidated throughout the day, oscillating in a narrow range.  I suspect it wont take too much longer to find out which way it breaks.

The gravestone doji commentary is a carry over from Friday.  If you are new to candlestick trading, take a look at the post. While this candlestick is not very common, you need to be able to visually recognize the bar when you see it.   For further detail, please refer to that post HERE

$SPY 60 minute chart

Bear Set up: An impulsive break below Friday’s low at $296.25 would be a bearish development and would favor a move to fill the gap to $293.24.  Should this move emerge, get short with a stop just above $296.25.

Bull Set up:  As long as price holds Friday’s low bulls can remain long. New bulls can use $296.25 to shoot against on the long side with a target at Fridays high near  $298.75.  A break above Friday’s high would be an objective place to either add or initiate a new long position with $301ish being the target.

 

 

$QQQ Daily

No technical changes.     Simply put, a close below Friday’s low at $190.80 is bearish and would likely mark the beginning of a short term reversal to fill the lower gap which would fill at $188.68.

A close above $191.11 would be bullish and would chip away at a bearish reversal scenario.  A break above downtrend resistance at $192ish would favor a run at new highs.

QQQ 60 min

Bear Set up: A break below Friday’s low at $190.80 would be a bearish development and would favor a move to fill the gap to $188.68.  Should this move emerge, get short with a stop just above $190.80.

Bull Set up:  As long as price holds Friday’s low bulls can remain long. New bulls can use $190.80 to shoot against on the long side with a target at Fridays high near  $192. 60. A break above Friday’s high would be an objective place to either add or initiate a new long position with the prior high at $193.81 being the target.

$IWM  Daily

To my eye, $150 looks like a good pivot to use.  A break above opens the door to $152 and possibly $154 if a broad market rally is supporting it.  Prices below $150 favors lower prices. From a swing trading perspective the top and bottom of the box have been places to locate nice trades as price ping pongs between levels. Here near $150 its much tougher to set it and forget it with choppy price action.

$IWM 60 minute

Bear Set up: A break below Friday’s low at $149.79 would be a bearish development and would favor a move to fill the gap to $147.72.  Should this move emerge, get short with a stop just above $149.79.

Bull Set up:  As long as price holds Friday’s low bulls can remain long. New bulls can use $149.79 to shoot against on the long side with a target at Fridays high near  $152. A break above Friday’s high would be an objective place to either add or initiate a new long position. THat said, there is significant OH resistance at $152.50. Conservative traders may want to hold off on adding or starting new longs until $152.50 is taken out.

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

Trade set ups

$DE Weekly A perfect example of an objective, low-risk trade location I like to find on Deere. Buy support, sell resistance unless you think this time is different. Go short here w/ a stop just above. If you get stopped out, you lose a few bucks but with the opportunity to flip long w/ a tight set up. If price moves lower, you might find yourself at the bottom of the box $40 lower from where you entered. Earnings late NOV

UBER – While nobody’s fan favorite at the moment, dont go to sleep on UBER. Breakout from the bullish falling wedge w/ bullish divergence on the indicators at the lows. A long position against the relatively near by lows might not be a bad place to be depending on your view of the market.

$CVNA      Price revisiting the scene of the breakdown; A common technical move. It either gets rejected here or it breaks out; no in between

 

 

$DRI –  The restaurant group is beginning to break down.  DRI already has.  Price finds itself in a pivotal spot.  $110 nearly perfectly bisects chart. Above ok for bulls, below and bears in control.  Bulls still have the ball; support is support until broken. $110 is support. If playing for a bounce get long with a stop just below.  Below $110 is a short w/ a stop just above.   Verify earnings date prior to taking a position.

 Open Positions

XOP Dec 20 P  for 1.29

VIX October 16th 17 C

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

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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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