Daily Profit Compass October 4

Tickers discussed:  SPY, QQQ, IWM, TLT, USO, GLD, SLV,  VIX,

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

No earnings releases today.

Last night Costco reported mixed results and was down $5 or so. Nothing for a nearly $300 stock.

Market Observations, Technical Developments, Outlook,  and Strategy

Market Recap:   The averages dropped between -1.1% and -1.5% after the ISM Non-Manufacturing Index for September came in weaker than expected, but the market quickly bounced back while rate-cut expectations increased. At the low of the day the S&P was down -4.1% from Monday’s close. This is the weakest start for the third quarter since 2008.
The ISM Non-Manufacturing PMI printed at 52.6 vs. expectations of 55 and a last of 56.4. Above 50 is still expansion, but the pace has slowed dramatically with today being the lowest print since August 2016.

The dramatic drop in the major averages was quickly bought up and, as it turned out, quite a nice rally with all 11 SPDR sectors higher. Lots of commentary floating around about why the big dip was bought.  For me it was triggered by a perfect, and I mean perfect, tag of the 200ema by QQQ and SPY.  Often when price approaches support or a key moving average for the first time in a while you’ll see a bounce. Yesterday’s bounce was bigger than normal but I don’t view it as anything more.  We are in an elevated vol environment so these bigger than normal rips n dips are to be expected. Speaking of elevated vol, the VIX hung in pretty well in the face of the advance closing in the low 19’s.

Meanwhile oil sold off for the 8th straight day, gold reclaimed $1500, and bonds climbed all day in the face of a strong rally.  I found the bond action notable. You, me and everyone under the sun buy equities, but when was the last time you bought a bond? Probably never.  Bonds are the domain of the big money boys.  Institutional money, sovereign wealth funds etc.  So the bond markets provide good clues to where fund flows are heading.

At the end of the day, I’ll tip my hat to the bulls, but the short -term trend remains down. If the bulls build on those gains after the jobs report we’ll have a lot more to think about over the weekend.

 

McClellan Oscillators

Here are the $NYMO ( NYSE ) and $NAMO ( COMPQ ) “rubber band” 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.

Both oscillators bounced and now have more room to the downside if it wants to go there.

 

 

 

 

 

 

 

 

 

 

 

S&P Leaders

S&P Laggards

 

 

 

Hong Kong News:    Island Governor Carrie Lam made it official…..you can’t wear face masks at public gatherings.   Let me know how that works out for you Ms. Lam.

China News:  President Xi contemplates Trump’s request for an investigation into Biden family corruption with Chinese companies so President Trump can be more easily elected, so we can have more trade wars, and so Trump can keep saying China has been fleecing us for 30 years.  Sounds logical.

Currency News:  Quiet

 SAFE HAVENS

Bonds. If we take out the spike high of $145.67 from yesterday, it will be notable along with opening the door to new highs/

Still long TLT oct 143 Calls.

 

 

 

 

 

$WTIC / $USO   How low can it go? an 8th day of selling has pushed price to near the August lows.

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    Price touched the top of the channel ; needs to pop above for a buy signal

 

 

 

 

 

$SLV    Price holding $16.25.  Traders can be long against $16.25 w/ a stop just below.

$VIX

Price held in pretty well in the face of the rip in equities. Today may be make or break depending on Jobs report reaction.

LONG  VIX October 16  $17 Calls

 

 

 

 

 

 

 

 

Strategy Update:

Viewing yesterday as a technically induced counter-trend bounce. There is an open gap above and a fill of those gaps would complete unfinished business. So if bulls build on yesterday’s gain, depending on how far they take it, could force a re-think.  Yesterday did serve to back off the oscillators so more downside is available if they end up doing that as well.

All that said, the bulls need approximately 3% pop today to negate a coming sell signal on the weekly chart.  THat is a big ask, but lets see what happens

ETF Mode

As you likely know, I dont typically hold individual stocks through earnings where there is no edge. Instead, I go into ETF mode as a way to play earnings for sectors.  It eliminates single stock risk but allows for participating in sector moves. For instance, $KRE or $KBE for bank earnings.  There is an ETF for everything. Choose ones that are liquid with tight option spreads

Risk off trades :   Firming. and held in well against equity advance

 

$SPY

To early for proclamations about the future but now I am viewing yesterday as simply a bounce.  The bull / bear pivot on the big picture is the uptrend line.

Daily

Swing Traders:   There is an open gap above which are logical targets if the market breaks higher.  Expect reactions at the gap entry and when the gap is closed. If the bulls clear $294 it would make the recent breakdown look like another dip that should have been bought.  A break back below the uptrend line reaffirms the bear view.

 

 

 

 

 

 

 

 

SPY 60 min:  As we move within the August trading range, vol is increasing. Gap resistance lies above and are targets for the bulls.  The support and resistance zones are well defined.  

 

 

 

 

 

 

 

 

 

$QQQ Daily

Swing Traders:    Open gap above along with the down trend line. As long as price remains below the down trend line the short term outlook is bearish.  Moves below 183.50 reinforce the bearish view.

 

 

 

 

 

 

 

 

QQQ 60 min:

A gap fill and close above the downtrend channel would flip the chart to short term bullish.  A down move off the open and break of  $183 reinforce the bearish view.

$IWM  Daily

IWM has the best chance to recover its uptrend line off the December lows. It needs a close above $148.50 to get price back above the uptrend line. Breaks back below $147 keep the chart bearish. A move below $146 opens door to test August trading range lows.

Swing Traders:   Use $147 as your pivot. Below $147 likely takes price to $146 and if that breaks, 144.50.  Below the August low and a break of the trading range likely sends this way down.  A move above $148.50 there is room to run to 150.

IWM 60 min

I quick gap fill overhead would complete unfinished business but if that does not happen, a break back below $146 opens the door to $144.50.  $146 is the bull / bear pivot. Above ok for bulls, below and bears take over. Maintain a bearish bias even when playing bounces.  The trend is down.

 

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

Triggered Trades – None

I want to see how the day plays out before adding exposure in either direction.

Open Positions

VIX October 16th 17 C

SBUX Oct 89 / 84 Put spread   at $1.50

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

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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