Daily Profit Compass Sep 28

Tickers discussed: SPY QQQ IWM and  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

Recognizing when you’re on “TILT”   

“TILT” is a term used in gambling to describe a player who is trading irrationally and well below their inherent level of skill.  The reasons for a player going TILT can be varied but at it’s core TILT is an emotional breakdown. It’s important to understand that humans have a reservoir that can absorb and modulate emotions. But over time, emotions build up and if the reservoir overflows, that is when we “snap”.  So if we take anger over lost trades home with us each day, that anger builds over time until we blow up. That manifests itself in us making bizarre trades that abandon everything we know and care about in risk control.  Something like going 5 or 10 times as big on a trade to recapture losses.

While recognizing the “tilt moment” is vital, what is better is to prevent it in the first place.  Venting to a friend can be helpful but it tends to keep the emotion active and alive. A more effective way to diffuse negative emotions is to journal them. Just write down what you’re feeling and why.  The writing process is a way to let the emotion flow out from you and drain the power from that negative emotional feeling.  If you consistently do that, there’s a good chance that you’ll never reach that “Tilt Moment” where you blow up  from accumulated negative emotions.  Give it a try because once you’re trading within the tilt regime, your money will disappear very quickly.

Companion Video

The Daily Profit Compass video provides a detailed technical view of the indexes, FATMAAN names along with plenty of market commentary aimed at keeping you on the right side of the trade.  Tickers: SPY, QQQ, IWM, FB, AAPL, AMZN, MSFT, GOOGL, NFLX, TSLA, SCPL, MCD

Earnings

News Flow

  • The NYT says Tax records reveal Trump paid minimal taxes in 2015 and 2016.
  • $CLF to Buy ArcelorMittel USA for $1.4B making is the largest producer of flat rolled steel in the US.
  • The US alledges JPM’s Precious Metals desk a “racketeering operation” as charges of conspiracy are unveiled . The $1B fine for spoofing may be the beginning and not the end.
  • First Presidential Debate is tomorrow night with high stakes for both candidates.
  • Slow data flow day with nothing really on the board.

Manic Monday – Sentiment remains buoyant following Friday’s lift.

Futures are decidedly upbeat this morning as green dominates the board as equities are up about 1% in the pre-market session.  Markets have apparently dismissed the Trump weekend headlines that Trump has paid minimal taxes and that he has a $400 M personally guaranteed load due next year.

As discussed over the weekend, keep a watchful eye on the USD. Gold, Silver and the Miners will be impacted by the USD’s direction of travel. As I write this, gold futures are down 0.5% and Silver down 0.75%.

Market Snapshots

PUT / CALL Extreme-o-meter 

No fear, more call buying.  Given the jump in futures this morning, I’d expect a big day for call buying.

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 

Detailed levels, trade plans for these charts, along with the FATMAAN names can be found on the companion video

$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

  • Tactically Bullish but happy to trade the vol in either direction
  • Strategically Neutral to slightly bearish.
    • We are still on daily sell signals across the board and price has not proven yet that it can break above prior trading range highs.

Other Observations and Commentary

  • 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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