Tickers discussed: SPY, QQQ, IWM, TLT, USO, GLD, SLV, CAR, GH, SMH, XLK VIX, PD
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
Costco on Thursday highlights a slow week of earnings.
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: The chickens came home to roost to a certain degree in markets yesterday. Markets had been dismissing underlying weakness in the economic numbers for a while, but when the ISM MFG number hit, it could not be ignored. Worst print since 2009 makes one sit up in the chair and take notice.
What was interesting yesterday was the simple persistence of selling. Places where you’d normally count on a bounce did not happen. There was simply nobody home at several support levels so the selling went on mostly unabated. IWM was ambushed, off 2%; SPY off 1.2%, and Q’s down 0.85%. The weakest sectors were XLB, XLI, XLF and XLE. Transports also had a rough day at the office as they lost their 200ema with a nasty red candle.
I’ve been watching AMZN and FB closely the past couple of weeks. Tried a couple mini day trades and overnight swings on AMZN to mostly mixed results, but it was interesting to watch these 2 yesterday. Both showed good relative strength. AMZN ever went green for a while before a little closing fade. Watch the FAAMG names for clues on QQQ and broad market. No uber serious sell offs can come without the generals cracking.
Bonds added $2 in about 15sec after the ISM print and gold / silver rallied as well. VIX closed above 18 and I believe it is poised for a moonshot if it wants it. Lots of OH resistance has been taken out so from that perspective a lot of work has been done.
Just below I post the McClellan Oscillators. Use them in guiding your decisions about either buying or scaling out of any PUT positions you may have. Buying PUTs are kind of like planting a tree. The best time to do it was a long time ago. So be careful about loading up on Puts into the hole. That usually does not end well; ask me how i know.
McClellan Oscillators
Here are the $NYMO ( NYSE ) and $NAMO ( COMPQ ) Oscillators. Over many years and many losses, I have learned not to fight NYMO. When NYMO and NAMO go into over bought or oversold territory, its time to be scaling out of positions, not piling in. Think of these as “rubber band stretch indexes”. They can only go so far before a snap back. I offer some guidance on the annotations as to what i consider over-bought and over-sold levels plus the actions you should consider. I find these charts only useful at the extremes.
S&P Leaders
ULTA rocketing out of the hole, unfazed by the market sell off. Price is now firmly inside the $100 gap to fill.
S&P Laggards
Online brokers decimated after both Interactive Brokers and Schwab announce over past few days that they are eliminating commissions for many retail traders.
Hong Kong News: More fierce clashes and now a protester has been shot with a live bullet who remains in critical condition. No end in sight. May get worse before it gets better. Markets closed yest of week.
China News: Fun Fact: The Chinese Military parade participants were instructed to wear DEPENDs under their uniform because the ceremony was going to last too long for them to “hold it” and breaking ranks for a potty break wasnt acceptable.
Currency News: USD did not like that bad ISM print and took a hit.
SAFE HAVENS
Bonds. With the recapture of $143 i got long OCT $143 Calls with a stop around $142.75. Door is open to higher prices. How far likely tied to equity sell off. Don’t forget the Jobs Report is Friday. THat will move the needle.
$WTIC / $USO I have re-drawn the downtrend line off the top. It should be a good reference for active traders. Below the line and below $11.10 keeps the chart bearish. With price at support, a small bounce should be expected. A break above the TL would likely spark a bigger rally. With Saudi production back at full force and global demand weakening, the path of least resistance seems lower. That said, Iran is getting desperate. Any supply disruption will spike this again.
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 Terrible day for gold as it loses the 50ema and key support. I see this moving to $136 as price is now in an area of thin price / volume support.
$SLV Testing a lower level of support at $15.75. Needs to hold here or price would likely move lower to the next level of support.
$VIX
THe VIX was up 14% and closed well above $18 which to my eye is the gateway for any moonshot it might consider. Watch it closely.
LONG VIX October 16 $17 Calls
Strategy Update:
What a difference a day makes. The trading psychology goes from “looks like I will be stopped out” to “I had it all the way” in 15seconds yesterday. Bears made inroads yesterday but there are still locations nearby where bulls could step in. I think a key level on QQQ is last Friday’s low. A move below $185.75 would likely bring in more selling. With all the shorts working, its time to settle in and watch. McClellan is too close to being oversold to pile into new short swing positions. Now, I want to focus on managing existing positions and exits rather than short entries ; then look for a location for a tradeable bounce.
Risk off trades : In TLT long, but metals lagging.
$SPY
Wow, that massive bearish engulfing candle sure left a mark on the chart. Such a candle portends more downside.
Daily
Swing Traders: $293 and 291.50 are key locations. Price set to gap down and open just beneath $291.50. Be prepared for a rally back to yesterday’s close to close the gap. If that happens, it would be a great place to locate a short position with a stop just above. Barring that scenario, look for a gap fill to $290.
SPY 60 min: Price set to open with gaps both above and below price. Tricky set up. They could flash $293 to fill the OH gap first, or flash $290 first to fill the lower gap. If they go low off the open I’d be looking to cover a short just before $290. If they rip the open to fill the upper gap first, I’d locate a short as close to $293 as possible.
$QQQ Daily
Swing Traders: Price is on the wrong side of 2 trend lines. It is below the uptrend line off the June low and below the downtrend line off the recent high. Use these as your guide to maintain a short bias. A break of the downtrend line would give bulls ST control. $186 was a battle ground in August. I expect the same now. A price break of $183.50 opens door to August lows.
QQQ 60 min:
Price set to open near $186 and there will be a gap above. Dont put it past these jokers to do a flash move higher to close that gap. Multi-level support zone at $185.50 – $185 and logical place for a bounce. I’d be more inclined to try a ST long for a bounce here. If $185 breaks, different story. Door would be open to 183.50.
$IWM Daily
Talk about a doomsday bar. A reasonably bright child of 10 would look at that bar and say it doesn’t look too good. IMO the bottom of the August range is in play.
Swing Traders: A kick back to $150 or the DT line would be ideal locations for a new short or to add to one. $147 is a probable bounce location, but if it breaks, here comes $144.
IWM 60 min
I expect $147 to hold on the first tag. Expect a bounce there. A break below is objective place to short. Be ready for a rally back to the trend line which is way up there. I dont know if IWM has the horsepower to get all the way there but technically possible with RSI near oversold conditions. Long against $147 w/ a stop just below isnt a bad place to be.
************************** TRADES **********************************
Triggered Trades – none
Trade Ideas
$CAR is again testing support; get short on a break of $27 and look to the prior lows as the target.
GH Now or never if you want to hit this. In a big air pocket.
SMH – THe gaps are still there; stubborn but falling now. I think those gaps get filled.
$XLK Broke trend; below the 50ema in green and not much stopping this until 75.
PD another broken IPO in consolidation box. Alarm 27.75 for a breakdown and signal to get short.
Open Positions
VIX October 16th 17 C
SBUX Oct 89 / 84 Put spread at $1.50
XLE Oct 59.5 P at 1.23
XBI oct 77p at 2.12
GLD oct 142 / 146 call spread at $1.25 closed at 50c for a loss.
QURE Oct $45 P at $3.61 – Closed Friday at 43%
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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