Tickers discussed: SPY QQQ IWM EURUSD TLT, JPM FATMAAN names Strategy & Tactic update
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.
Trader’s Couch
Know when to back away from the trade desk
Within the mentorship group we’ve got at least a couple of traders whose lives have become busy. One has a medical issue with a loved one, the other is busy at work and now has the added burden of managing little ones at home who are now beginning stay-at-home virtual school. Understand that everything that is going on in your life you bring to the trading desk. Distraction and divided focus will impede and hinder good trading. Know when to back away. You won’t miss a thing and will likely save yourself the added grief of trading poorly. THe market provides an endless stream of opportunities. Those opportunities will be there Monday, a month from now, a year from now. Pick the ball back up when your live has settled back into a rhythm where you can focus on your trading. We will all be here ready to help when you return.
Companion Video
Video covers FOMC sensitive Assets, along with coverage of the indexes and FATMAAN names. Run the video at 1.25x to reduce run time with no loss of quality.
Earnings
News Flow
- FTC prepares possible antitrust lawsuit against Facebook
- VW follows Daimler in issuing green bonds to fund electrification and other green projects
- $SNOW prices IPO at $120 / $33B valuation; $FROG prices at $44 / $4B valuation
- Trump reviewing $ORCL / TikTok deal as a decision nears
- $AAPL introduces a series of new products as it readies for the holiday season
FOMC Sensitive Asset Classes
Euro / USD Pair
A falling $USD ( rising EUR/USD pair ) is a tailwind for commodities, precious metals, and to a certain extent equities. The pair currently is consolidating below long-term downtrend resistance and has been toggling between $1.175-1.190 for weeks. If the pair could somehow punch through $1.20 it would clear long term resistance and have room to run. This would likely send gold and commodities racing higher. Of course, if the pair is ultimately rejected here, and the USD strengthens, then the big plans for gold probably are tempered in the near future.
Bonds – TLT
Powell and the FOMC say they are willing to let the economy “run hot” by letting inflation run over 2%. THe only problem is they haven’t seen 2% inflation in over 10 years and have not demonstrated they have the tools to engineer it. If it begins to work you’ll see rates tick up and TLT prices fall. Although you may not often trade TLT, but if price breaks below $160, you want to be on that train because there is a massive air pocket below. From the 30 min chart you can see the potential for an inverse H&S forming. If there is some big sell off in equities, or if Powell dims the economic outlook today, there may be folks piling into TLT as a safe haven, pushing rates down.
Banks – Stay Away
KBW vs SPY ratio is attacking the lows!
$KRE
Just broke below a huge triangle and is rolling over. Below $37 and bad things will happen more quickly.
$JPM –
Grinding into the apex of a big triangle. Sitting on the 50ema. Simply has to hold $97.50 or it might fall apart pretty fast. Check out yesterdays huge bearish engulfing candle, down 3%.
$XLF
In my opinion, a break below $24.50 sends this to $22.50 relatively quickly. Alarms are cheap, set one there and be ready if it breaks. As long as it holds $24.50 the bulls stay alive. Notice that below $24.50 price would be below all the moving averages. Not a good place to be.
Strategy & Tactics –
Still have a slight bias lower but bulls have a rally underway so we will see how far they can get. FOMC plus a big OPEX Friday likely means volatile chop in both directions. Keeping position trades light until more clarity is seen. Too early to pile in either long or short IMO.
FOMC – reminder, the first move is often fake. With Sept. OPEX on Friday plus the FOMC it does not seem like the best time to go out on a limb. Sure trade the vol intra day but otherwise keep things light.
- If price recaptures levels from below it is bullish. The levels are clearly marked.
- If you’re a swing trader, ignore intra day noise and remain focused on the fact that we are on sell signals across the board.
- If we break below Fridays close or worse, below Friday’s lows, it would be very bearish.
- Volatility is back. This will go in both directions.
Things to Do
- Look for both long and short set ups and be ready to go in either direction.
- Be patient; be ready
- Stay tactical. This is active trader wheelhouse zone with big intraday swings in both directions. If this is not your cup of tea, set up for Swing positions on the short side that you can hold for several days.
- FATMAAN – Remain the directional key to market. Market goes no where unless big cap tech fades.
- Remain Fluid and flexible in both positions and thinking; Dont lock in on Narratives.
Active Trade set ups / Positions
For the sake of space, I’ve removed the trade / activity. If you want to look at it, simply look at prior blog posts.
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Sept 15 Followed unusual options activity and promising chart into SCPL NOV 15 calls at 1.95. Speculative Trade
Sept 14 Entered NTR Nov 40 Calls
Index Charts
SPY 30 min
SPY is on a Daily Sell Signal after having dropped below its rising channel. From the 30 min chart, $342.50 has capped the 2 most recent rallies. A breakout and hold above $342.50 opens the door to $345 as the target. Anything above $345 targets $349. On the downside, price made a run at the first gap below but did not fill it. If prices fall back into the gap at $340.60 it favors a move toward $338. As you can see there are several gaps below that need repair. If price were to, at some point in the future, take out the prior low at $331 it would favor a larger leg down.
$QQQ 30 min
THe Q’s are also on a Daily Sell signal with price below it’s rising channel on the daily. ( not shown ) Yesterday, price was bounded between the gap at $277.70 and $280.50. A break above $280.50 opens the door for a run at the open gap between $282 and $283.50. Above the gap lies $286 as the next price objective. Traders can get long on any break above 280.50 and systematically raise stops as price levels are recaptured from below. On the downside, any move into the gap at $277.70 favors a gap fill to $275. Move below $275 likely brings in more sellers and the gap from $273-$270 would be the natural target.
$IWM 30 min
IWM went on a daily sell signal probably a month ago but has traded mostly sideways since. THe pivot today from the 30 min chart is $153.70. Price closed below the level yesterday, but is above in the premarket. As long as price holds above $153.70, traders can be long and looking for a move to $155. $155 should be tough resistance, but if price punches through decent upside potential exists. On the downside, if prices cant hold $153.70, first support is $152, then 150.50 ish.
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