Daily Profit Compass Sep 25

Tickers discussed: SPY QQQ IWM HYG   FATMAAN names

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

A Trading Truth

Replace the word “universe” with “Markets” and you will possess a master key to unlock your potential as a trader. Most market participants new to the game believe their brain power and work ethic will carry them to success.  For most, that means losing because they apply their brain power to the wrong thing. It’s like trying to rebuild your car engine to fix a flat tire. Well educated people try to apply logic to the market where there is none. Anybody trying to figure out the “why’s ” and “how come’s” of this week will have wasted a bunch of time and be no closer to the answer when they quit than when they started.  If that is you, get off the hamster wheel.   Trade like a 5th grader. Focus on price and it’s relation to support and resistance.  You buy support and sell resistance. In between is nothing.  Take a close look at SPY yesterday.  It opened at support we identified at $320 and then moved to resistance we also identified at $327 where is was rejected. Then price came back to re-test the Wednesday close at $322.  I count at least $12-$14 of straight line travel from point to point.  When I present it like that, you’re probably wondering why you did not make $15,000 yesterday on 1 stock with 3-4 trades. If that is you, carefully examine what you were doing and thinking yesterday. Then stop doing that and things will get easier.

Earnings

News Flow

  • Pelosi – Mnuchin re-fire Covid Relief talks but that isn’t the same thing as having a deal.
  • Goldman cuts grow forecasts by half citing no new stimulus.
  • Virus hotspots popping up all over the place.
  • European Bourses get dwarfed as the bottom of Euro banking index drops out

Market Snapshots

QE Fade

Fear / Greed Sentiment

Asset Class Fund Flows

PUT / CALL Extreme-o-meter 

Nothing to see this morning. Yesterday the ratio was 1. Exactly in the middle with no extremes either way.

Watch HYG – High Yield Bonds

This is one of the first places credit stress will be seen. If price loses 82 where the 200ema and technical support reside, you will start seeing it on your equity price action ( lower ) and hearing about it on Fintwit

 

Active Trade set ups / Positions

++++++++++++++++++++++++++++++++++++++++++++++++++++

Sept 24 ( Today )  $SCPL lost $16 into the close.  Our position in Nov 15 Calls can be closed out for either a scratch trade or a slight profit. I will add that the big buyers in Nov 15 Calls and Nov 20 calls remain in open interest.  I leave it up to you whether to hold as a speculative position or to simply close it out.

$NTR.  If $NTR loses $39.50, close it.  A strong $USD will weight on commodity complex and basic materials sector.

Sept 22 – Exited PDD and AAPL shorts with upswing underway.

Sept 18  rolled AAPL to oct 2 105 P and booked 100% on the 112.5P;  Bot PPD oct 75 P; Bot QQQ sept 25 268P at the close per mid-day note. 

Sept 16 AAPL Sept 25 $112.5 puts at 3.25

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 

If you’d like commentary and charts of the Indexes and FATMAAN names at a more granular level, you can find that in last night’s Market Recap Video HERE

$SPY 2 hour

$SPY 30 min

$QQQ 2 hour

$QQQ 30 min

$IWM 2 hour

$IWM 30 min

Pulling it all together – Strategy and Outlook

No Changes –  For me, the backdrop still says Risk Off.  Here’s why.

  • FATMAAN names, aside from GOOGL, are still way above their 200 ems even after the recent pull back.
  • We have not even had a 38% Fib retrace of the March  – September advance. Technically speaking There is still more to go.
  • Until proven otherwise by price, I am not buying that we can put in a durable bottom with excess call buying and zero fear in the market.
  • Sentiment is far from washed out. Dipsters still very active, especially in tech.
  • Political turmoil from here until November does not lend itself to piling in long. ( Tactically maybe, Long-Term no )   Expecting increased Vol through election.
    • If DC can come together for a substantial Covid Relief Package, that would be a big boost for markets but IMO would only come after a market dump as a catalyst.
  • We have daily sell signals across the board on the indexes and the RSI / PPO indicators are all in bear territory for the first time since March. THat is a change of character that should be respected.
  • Weekly hi-level PPO bear crosses are pending for major indexes and FATMAAN names and could be confirmed tomorrow. These signals would favor lower prices for longer and a deeper pull back. For reference, we had weekly sell signals in March, Q4 $2018, and for “Volmageddon in Feb 2018.  They don’t happen every day.
  • In the Bulls favor is the FOMC.  If there was a big market dump, Powell & Co. would likely bring out the bazookas but it would have to be a big drop. I dont think the Fed wants to step in weeks away from an election to save everything for fear of being accused of partisanship.

 

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