Daily Profit Compass October 30

Tickers discussed:  SPY, QQQ, IWM, TLT, USO, NKE  Auto Parts Group

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

FB and AAPL after the bell.

Market Observations, Technical Developments, Outlook,  and Strategy

FED DAY!

Not a ton of commentary this morning ahead of the Fed rate announcement. Yesterday the Q’s were soft as traders faded the MSFT cloud contract pop, AAPL sold off , and GOOGL / AMZN both off.   Just no way to flip QQQ green when FAAMG is red across the board.

Boeing CEO is again on the Hill. Yesterday was mostly uneventful.

Fed announcement is at 2pm and presser is at 2.30.  The last 2 Fed announcements have marked turning points and sell offs in equities.  That does not mean we sell off today but cautionary.  Those sell offs also came at marginal new highs as we have now. I dont expect a lot of movement ahead of 2pm. The pattern has been a drift higher.

As a reminder, FOMC decisions are often met with fake moves. It make take a day or 2 for the real move to emerge, plus we have jobs day on Friday.  Let’s let the real move emerge before going crazy either long or short.

Noticing FOMO extreme call buying creeping in as shown on my chart.  The indicator seems better at calling bottoms than tops but regardless, insert this factoid into your wall of worry chart.

Strategy Update:   Maintain bullish bias.  I’ve stated on the charts that nothing bad can happen above $298 on SPY.   I think you can move that up to $301 now on SPY and $194 on the Q’s. THose were the breakout levels.   I think its prudent to continue to ratchet up stops and not sit complacently by. If you’re in options, continue to roll up and out regularly harvesting profits and staying long.  I see pros do this all the time. It is one of the powerful features of options to be able to do this.  Take advantage of it.

The stock rally has whacked gold / silver and the miners. Powell could reverse everything tomorrow.  Ditto rates. Bond yield have been backing up and sending bond prices lower.

Sector ETF’s 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.

$TLT Bonds – No changes

Price needs to hold $136.50 or $133 comes into play.  Powell will move this today. How far or which way? No idea.

$USO  $11.62 working as a good pivot point. Price has softened with traders anticipating an inventory build at 10.30am today.

$SPY Daily – No Changes

Swing Traders.  Above $301 and bulls remain in control. Swing traders can stay long and move stops up.  There is a gap below at $302.91 – $301.60.  Like in August, and other times when stocks break from consolidation ranges, the breakout itself is bullish. What you dont want to see is price breaking back below into the old trading range as it signals a false breakout.  THe bear divergences pointed out are not sell signals but warning flags. On a breakout you want and expect more momentum, not less.  If PPO were to put in a bear cross and price drops back below $301, that would be your sell signal on the daily time frame.

$SPY 60 minute chart – No Changes

Price walked along gap support most of the day and when it was all said and done, price was little changed.

Bear Set up:  Bulls are in control and breakouts are bullish not bearish. Realistically the first objective shorting op would be if price falls below $302.91 gap entry and then if price drops below $301. 

Bull Set up:   Stay long against $302.91 at the gap.  A back test of $301 that holds would  be a nice place to add to a long or start a new position.

$QQQ Daily – Moving into the gap

Mega cap tech FAAMG names were very weak.  FB, AAPL, AMZN, MSFT and GOOGL were all down. Because of the Cap-weighted nature of QQQ when the big boys are red, its nearly impossible for QQQ to be green.  Price moved into the lower gap and is therefor vulnerable to fall to $195.64 to fill the gap. 

Swing Traders.  Price gapped higher within a rising wedge creating a gap from $196.55 – $195.64.  The target move from the consolidation area has been achieved. A back test of $194 that holds would be a place to add to or start a new long position.  Note this is a divergent high as PPO is lower when price is higher.  THat said, no sell signals exist. Nothing bad can happen if price remains above $194.

QQQ 60 min

Price is in the middle of its gap. May fall further to fill it.  Key off yesterdays close. Below is bearish. Recapturing $196.55 would be a plus for bulls.

Bear Set up:   Short yesterdays close for a potential gap fill.  I’d expect $195.64 to hold but if it does not, a break below would be a place to add or start a short position.  In this case, $194.50 / $194 would be the target.

Bull Set up:   A recapture of  $196.55 would be bullish.  $195.64 after a completed gap fill would be an objective place to try a long w/ a tight stop. If that location fails a back test of the original breakout would be favored back at $194ish.  I’d expect a lot of bulls to be buying there.  If $194 does not hold, it will be a failed breakout which is bearish.

$IWM  Daily – Holding the breakout and outperforming

Outperformed yesterday up 0.77%. No changes to the commentary from yesterday. The $157.50 – $158.50 remains key OH resistance.

Price broke above $155 and moved toward key OH resistance at $157.50 – $158.50.  Clearing $158.50 would be a big technical event and quite possibly be the best opportunity of the indexes.  $170ish was the prior high from 2018. A breakout would open the door for a $12 catch up trade.  That said, $158.50 has held for over a year. Tough nut to crack.

Swing Traders.   $155 is the daily pivot.  Anything above is constructive and prices below, not so much.   Prices below $153.50 are outright bearish.  The over head target is  $157. 50

$IWM 60 minute –

Bear Set up:  Objective shorting locations would be a rejection at OH resistance or on a break back below $155; pile in on a break below $153.50

Bull Set up:  Stay or get long against $155 and look for $157 for starters, maybe as high as $158.50.  $153.50 is the line in the sand for longs. You dont want to see price drop below this level.

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

Still in MCD short, not doing much but green.  Nov 192.50p

CMG – Short worked great. Rolled Nov 1 770p to Nov 1 760p for 193%. Will exit position today if price is not red. Will re-position for Nov 8. Support = $720 and the price action is very weak as money comes out of restaurants and this name in particular.

Trade set ups

$NKE

I missed this sell off which would have been a good one.  Now price is backtesting the breakout and after closing the earnings gap.  This “should ” hold here and is an objective location to try a long with a tight stop.  If however price drops below $89, it becomes a bearish chart after a substantial failed breakout.  Not often you go from all time highs and slice through the 8,20,and 50 emas like the were not there. A break below $89 targets the 200ema at $84.

 

$DJUSAT – Auto Parts

Auto part industry group is breaking out.

ALV, APTV, BWA, CPRT, GPC, MGA, SMP, THRM.     have promising charts within the group.  If the market continues to remain constructive, I’d expect this group to continue to perform.

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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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