Daily Profit Compass October 24

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Tickers discussed:  SPY, QQQ, IWM, TLT, USO,  YUM, KEY, LOPE, FL, BURL

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

Pinned under Resistance

Price continues to trade within the narrow ranges of the previous few days just below key resistance at / near all-time highs for the QQQ & SPY.  IWM is also consolidating at higher levels.   I don’t think this is particularly unexpected or unusual.  I’ll admit it could be possibly frustrating for traders, but they call it resistance for a reason. The muscle memory of the market repeatedly selling off at new highs remains fresh.  It’s like the market saying “who wants to step off the curb in front of a steamroller?”  We may be here a while longer until a big enough catalyst sparks a rally.  Maybe AMZN can do it tonight.

$CAT opened the day with disaster numbers on their earning report but the bulls gobbled up a deep dip even before the market opened. The rest of the day was pretty docile with all the averages trading in a narrow range. No real technical changes to report. MSFT had an ok earnings report but was trading flat AH as it did not inspire many buyers or sellers to do anything. TSLA however blew the roof off their report jacking price some $50 in AH trading. AMZN on deck for tonight. We’ll see what they have to say.
More Repo Money –  Is there a Boogie Man out there?
The New York Fed announced they’ll be expanding both their overnight and term-repo operations by 68% and 28% respectively, to a dumb-founding  $120 billion dollars per day for overnight repo and $45 billion a day for term-repo. This is in addition to $60 billion a month in permanent open market operations (QE that is not QE per Jerome )).
For a decade these measures have not been needed. At the last FOMC meeting Powell told us about the new program and that it was to prevent the overnight spike in inter-bank lending rates. Now less than a month later they need to jack the amounts.  I mean $165B a day? Something is wrong in Denmark and we’ll never know what the problem is until we wake up to it. Just keep watching price; its all we can do.

Strategy Update:   I remain light on positions but have been able to pick off some intra day moves.  $MSFT and $AMZN have the ability to gap QQQ in either direction and I am not willing to guess which way this gap will go. Near term direction will be decided in the next week or so.

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.

S&P Leaders

/ S & P Laggards – Stockcharts lost their data feed for this info, will return ASAP


I am starting a new section.  I want to provide you with a fresh list each morning of names that either gapped higher or lower the previous day.  These names present potential opportunities for 2nd day range break trades. There is no way I can chart these in detail each day, so simply a list is the best I can do. If / when i see a trade to make, i will let you know.


Hong Kong News:   Quiet.

China News:   Tweet bound……

Currency News:  British Pound getting whipped around by BREXIT; $YUAN stable

Bonds.  Bonds continue to chop around. Price did recapture an important overhead level and from a technical standpoint is a positive and a place where traders could be long with a tight stop.  The path for bond prices and equity prices look like its a matter of who blinks first.

$USO  Oil rocketed higher on a better than expected inventory draw and has brought price to resistance.  We are at a pivot point identified weeks ago. A break and hold above would be bullish and provide a level to shoot against on the long side.  Similarly, if price cant get through you’ve got a short set up w/ a stop just above.

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 )  

$XOP This ETF tracks oil & gas production.  Flagged yesterday as a bullish set up and was up 2%.  I still like it long against the low.   Commentary from yesterday: Note the double bottom with the bullish divergence on the indicators. This is often a very bullish set up. One could get long against the low which is close by when you could place a stop.  Obviously this will track oil pretty closely.


$GLD  and $SLV still consolidating as equities push higher.  Key levels on gold futures ( /GC ) are $1492 and $1500.

$SPY Daily

Swing Traders.  No technical changes as we play the waiting game. Traders can remain long against the gap opening. What is needed now is a breakout for longs above $301.  Lots of bears will be wanting to fade $301 so expect a war there. I doubt it will waltz through unless a major news event pops it. As I say in the chart annotations, not many bad things can happen with price over all the ema’s and above $298.

$SPY 60 minute chart

No changes. The levels remain in place as we bide time.

Bear Set up:  Shorting locations are as follows 1. A rejection near $301.  2. A break below yesterday’s low at $298.50   3. A gap entry at  $297.10.  4. A gap entry at $296.25 5.  Set a stop just above your entry when and if price heads lower.

Bull Set up:   If price back tests support levels and they hold, those are locations to get long against support with a stop just below. Otherwise, you’re waiting for a definitive breakout.    To my eye, $298 is a key level to hold. Breaks below favor more downside.

$QQQ Daily – No Changes

Price is still within the triangle and above support. Closes below trend will initiate a daily sell signal.  MSFT and AMZN have the potential to jack price all over the place.

Swing Traders. If you’ve been long from lower prices, maintain that position and hope for a breakout.  I’d be concerned if price breaks below the uptrend line off the June low as it would indicate a technical breakdown.  We are supposed to breakout here, so anything less than that becomes a sell signal.

QQQ 60 min

Price traded within a narrow range and has carved out a consolidation area and the levels are clear on the chart. We are set to open above $192.60. If they sell off the open to back fill the gap, and $192.60 holds, that would be a great place to either start or add to a long and look for a push to $194. As always, set your stop just below. 

Note:  If you hold QQQ positions overnight, you’ll have gap risk in either direction due to AMZN reporting. .  My plan is to be flat with no overnight hold.   The commentary below remains unchanged from yesterday.

Bear Set up:   Shorting locations.  1. A rejection of new highs near $194. – $194.50    2.. A drop below $192.60  3. A drop below $191.50 4. A  gap entry at $191.   5. A gap entry at $190.80

Bull Set up:  As long as price holds $192.60 traders can stay long ( depending on your entry ) and look for a breakout above $194..  A break above $194 with a hold would be a place to add or start a new long position. Become cautious on a break below 192.60 and especially concerned with a break below $190.80

$IWM  Daily –

No changes.    Price is flagging within a narrow range between $153.90 gap support and $155. A break of the range either higher or lower will trigger a trade.

Swing Traders.   On the daily time frame, Bulls are ok above $152.  If you want to maintain a tight leash, $153.90 is your exit on a break below. If price pops $155 and holds, a great location to either add or start a long position with an eye toward $157 / 158.    THe indicators favor a further advance but the gap below is unfinished business.

$IWM 60 minute – No Changes

Bear Set up:  On a break of $153.90, get short and look for a gap fill to $152.61.  I would be prepared to cover at $152.50 where a bounce would be favored; then flip long with a tight stop.

Bull Set up:  Bulls ok as long as $153.90 holds and can keep $156.50 in their sights as a first target.  On a break above $155, either add to or start a long position is fine.  Close long positions with a break below $153.90 as a gap fill is favored.  Look to re-position long at $152.50 with a tight stop below.

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

Trade set ups

$BURL  Daily   Have posted several times recently. Hard rejection off the top of the box.  Key location = $100.  A hold there favors a trip back to the top of the box, a breakdown favors a $15 gap fill.  Indicators are weak

$FL Daily  Above the 200ema I like this long for a $8 gap fill try.  Earnings far enough out for the trade to make progress.

$LOPE Weekly  –   Coming off a stiff rejection at the double top high at the top of the box.  Watch price closely in and around $90. It is worth your while to do so. A hold at $90 favors a trip back to the top of the box. A breakdown targets $50 over time.  With RSI and Momentum heading out of town I favor a break but resistance is resistance until broken so you gotta wait for price to lead the way.

$YUM  Weekly   This may look like nothing here on the weekly but trust me, it is.  Pull up a daily chart and you’ll see the breakdown more clearly. I favor a move to the channel low.

Note on Restaurants.

On October 15 I posted a piece on restaurants.  Find it HERE 

From MCD, SBUX, CMG, YUM to more names i could list, the group is selling off together and many names have not even reported yet. Either the big boys know something or its just a rotation but the reason isnt that important. Scroll thru the restaurant names and you’ll see what i mean.

$KEY Bank – Daily   Many financials including KEY are at the top of their ranges and making noises about breaking out.  Alarm $18.50 and take it long if it breaks out.  Alarm $18 for a rejection at resistance.   Another one to look at is $KRE, regional bank ETF. It too is at the top of the range and poised to break out.  Worth a look especially if you’d like to hold thru earnings season to reduce single stock risk

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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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