Tickers discussed: SPY, QQQ, IWM, TLT, USO, GLD, SLV, OLLI, GS, DIS, VIX, KRE, XOP
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
Light week of earnings. Big banks get into full swing next week.
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: Futures are boldly green this morning as China re-states that it is prepared to make a partial trade deal despite US newly imposed VISA restrictions.
Yesterday things were more dour as all 11 sectors finished in the red as al the major indexes were down around 1.5%. The worst performers were XLF, XLV, XLK, XLB, and XLE. The losses here were between 1.7 and 2%.
What are the technicals saying?
As we discussed yesterday, from a technical view, price reversed its uptrend on Monday at a key resistance level and saw follow through yesterday. In doing so, a gap was formed and has yet to be filled. With the boost from futures, maybe they’ll make a run for that gap today and try to fill it. All that said, this weeks price action keeps the short -term downtrend in SPY and QQQ in tact as evidenced by a series of lower highs and lower lows. If price were to rally to close above last Friday’s high, the downtrend would be in question. Short of that, the first downside target is last Thursday’s low.
Volatility Box
By now, you’ve had to notice the increased volatility. Price has dropped back into the August trading range, which for lack of another name was a volatility box. You remember, trips back and forth from the bottom to the top of the box. So now that volatility returns. Taking a step back, one has to wonder what is happening. News events and the narratives that follow are embedded in price movement. I think the quote from Soros deserves careful consideration. We are in the process of transitioning to a new trend. Expect the volatility to persist until the new trend is established.
$NYMO and $NAMO Oscillators
The Thursday / Friday rally burned off the oversold condition and “allowed” yesterday’s down move. One of my trading rules is to “Dont fight NYMO”. Over sold or over bought conditions are often violently corrected.
S&P Leaders
S&P Laggards
Hong Kong News:
China News: Chinese NBA sponsors sever ties. Meanwhile China signals it still is ready for a partial deal lifting markets
Currency News: USD still rules the roost.
SAFE HAVENS
Bonds. Price has been oscillating within a narrow range and in the process has built a shelf of support at $144.60. Resistance is $1 higher. Breaks above or below will set near term direction. If price4 breaks below $144.60 i plan to close my long position.
I am long TLT oct 143 Calls.
$USO Price is in between 2 key levels, $11.10 and $10.71. Breaks above or below will likely determine the next major move. I own Oct $11 Puts
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 Gold is challenging downtrend resistance. IMO any break above the DT line should be bought. The indicators are poised to support a move higher.
$SLV Price is challenging downtrend resistance with the indicators poised to support the move with RSI trying to break out and PPO having reset near the zero line which is bullish. Any break out should be bought. The PPO being at a low level gives upside momentum a long runway on a break higher.
$VIX
Price was up 13.55% and pushed to the upper edge of the Bollinger band to close at $20.28. From a technical view, the stage is still set for a moonshot. The PPO and RSI are not extended and have room to the upside. So there is room above if it wants to go there.
LONG VIX October 16 $17 Calls
Strategy Update: Holding existing shorts but will likely not be adding much in the way of short exposure ahead of trade talk results.
ETF Mode
I opened a small position in $KRE NOV 50P to capture bank earnings season over the next month. 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 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 : Gold and Silver seem poised for an up move. The trend in Bond prices is higher but are in a period of consolidation over the past few days just under OH resistance.
$SPY
Swing Traders: From a technical view, not any big time changes. Yesterday left a gap above unfilled. The downside target is last Thursday’s spike low at $285 which is the 200ema location. The upside target would be to fill gap to $293
Use $288.50 as the bull / bear pivot for today. Bulls ok above; below and bears may feel emboldened.
SPY 60 min: With futures boldly green, bulls will be in charge coming out of the gate. There will be a big gap below and the open gap from yesterday above. Be careful of getting all FOMO’d up in the first minutes of the session. They may decide to flash the lower gap before heading higher. THe support and resistance zone are clear on the chart. Trade in and around them. If / when the upper gap is filled, I’d be a motivated seller at that location w/ a stop above.
$QQQ Daily
Swing Traders: With the rejection and reversal in price, return to a bearish bias. Use $185.50 as your bull / bear pivot for short term trading. Be mindful of the big open gap below and the gap above which was just shy of a complete fill yesterday. Also be mindful of fake bars. THe last 2 days, buyers of fake spikes have been steamrolled by monster fades.
QQQ 60 min:
As mentioned, use $185.50 as a pivot today. THere should be a lot of volatility which is opportunity for nimble traders. The levels are clear. Use them as intermediate way stations for new decisions. As you likely know, trade location is critical. Identify low-risk objective locations to try trades.
From TA 101. BUY at SUPPORT or on BREAKOUTS. SELL at RESISTANCE or BREAKDOWNs. If you do that and set a tight stop which you honor, you’re well on your way to a good day of trading.
$IWM Daily
For intermediate to long term, Stay bearish; nothing in chart to suggest any change is imminent
Swing Traders: Price is just below $148 in the premarket just below resistance. Although the chart taken in whole is bearish, above $148 opens door to a possibly run at $150-150.50. If you’re already in a swing short, sit tight through the noise. If price takes out $150.50 I’d be looking to cover and reposition because prices above $150.50 would be favored to go higher.
IWM 60 min
There is a gap to fill to $149. We will open in the middle of the gap at $148. Use $148 as a day trading pivot. Below bearish, above bullish. I’d would be motivated to try and sell $149 on the completion of the gap fill w/ a stop above. Moves back below $147 and certainly $146 would be bearish and would target yet another test of the low side of the trading range at $144.50.
************************** TRADES **********************************
Trade set ups
$XOP Yesterday one trader bought 10000 XOP Jan 23 P for $3 each. I followed that idea but in Dec 20P paying 1.29. With oil up a little this morning, you may get these a little cheaper if you care to follow along.
$KRE Bought small NOV 50 P to capture bank earnings which I think will be under pressure during this cycle.
$OLLI – Dipped below $54 but then recovered it by days end. Chart from Monday. Resetting alarm. $54 is key support. Alarm it. A break below is a sell signal.
DIS – Down almost 2% yesterday. Make sure you’ve got an alarm set on this if you are interested in trading it. Earnings in 4 weeks
GS – keep an alarm on $195 for a break below and a big downside projected move.
Open Positions
VIX October 16th 17 C
SBUX Oct 89 / 84 Put spread at $1.50 – closed at $3 or better
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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