The Daily Profit Compass identifies the key levels and trading locations for the indexes with trading plans and timely commentary to keep you on the right side of the trade.
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: SPY and QQQ gapped higher on the open in an attempt to break above the August trading range. That attempt was firmly rejected as price sold off most of the day. Today futures are moderately red and off about 0.75% as I write this as traders fret about new tariffs kicking in over the weekend and no trade talks scheduled.
Bonds. Flat at / near recent highs. While bonds remain overbought and extended, the “let’s short bonds” crowd has been foiled thus far as a relentless bid keeps TLT hovering near the highs.
Currency News: British Pound drops below 1.20 as BREXIT turmoil reigns supreme. $USD continues to hold it’s bid at / near highs. YUAN: Offshore hits 7.18 as China’s currency continues to slide.
Gold / Silver : Both metals were up about 0.50% and are up between 0.75% – 1% this morning.
Oil— Ugly day dropping 2.84 % as global growth fears overtake supply side worries. Price is grinding into an ever narrowing consolidation triangle. A breakout / breakdown should have a fair amount of energy behind it. I have the following levels as support. $54.80 / 54.15 / $53.50 / 52.90 / 50.90 ( from the 60m chart )
Hong Kong: Protesters roll on in 13th week of protests which disrupted Mass Transit and Airport access. Meanwhile Island Governor Carrie Lam was caught on tape saying “I’d resign if I could” as she addressed business leaders last week. Now Lam states “I never considered resigning nor have I ever discussed it with Beijing.
Strategy Update: Short—term Bearish; intermediate term bearish
Maintain Short –term bearish bias : Until SPY takes out 294 and QQQ takes out $190, my bias remains to the short side although while price remains in the chop zone, those biases will need to remain bridled as upside risk remains elevated.
Sell the Rips: Looking to fade the rips if/ when they present themselves.
TLT— I am out. Looking for a minor pull back for entry. While many are trying to short this ( and it may turn out to be a great trade ) I am simply going to step aside for now and watch. The big trend is up and I think it’s headed much higher, so I’ll be content looking for a dip to buy.
On Friday. Price gapped up to key resistance where it was firmly and quickly rejected. Now as I write this futures are smartly red as the downside momentum from Friday carries through. All that said, price remains within the wide trading range and therefor remains anyone’s ballgame. Expect continued volatility.
Key thoughts for today
GAP Open: The anticipated open will leave a gap above. Watch for a flash gap fill higher. If we get that, a short entry when price fills the gap at or near Friday’s low would be an objective location with a stop just above.
Gap Below: There remains an open gap from $290.50 to $289.
Swing Traders: While price remains trapped between $282 – $294 there is a high likelihood that both long and short swing positions will get chopped to pieces. Swing traders should wait for a clean move either above or below the trading range for multi-day multi-week swing positioning.
SPY 60 min: The key trading locations for nimble, active traders are marked below. Pay particularly close attention to the open gap below price. A move into the gap at $290.50 favors a fast move to $189.
Like SPY, QQQ was firmly rejected at the range high on Friday and sold off. Futures are moderately red signaling a likely risk off day as sell side activity is following through from Friday.
Key thoughts for today
GAPs: There will likely be a sizable OH gap formed on the open. Watch for a flash gap fill higher. There is also a gap below from $186.50 to $185.25. These are important locations on the chart.
Swing Traders: While price remains trapped between $179.50 – $189 there is a high likelihood that both long and short swing positions will get chopped to pieces. Swing traders should keep their powder dry and be ready to pounce on either a break out or breakdown from the range.
QQQ 60 min: The key locations are as follows.
$186.5 = Gap entry / $185.25 = Gap Fill / $183.50 = key support level and gateway price to lower 1/3 of the wide trading range.
Like SPY / QQQ, IWM was firmly rejected from it’s recent range high of $150 and sent lower. If you got short at $150, stay short and look for a move to $147, then the bottom of the range at $145. There is an open gap from $148 to $147. Given price is below all the key ema’s this index is clearly bearish and therefore traders should maintain a bearish bias here.
Swing Traders: $150 is the gateway to higher prices while $145 is the gateway to lower prices. Prices in between are subject to chop.
IWM 60 min
A move to $147 would close an open gap and a likely location for bulls to defend. To my eye, a move below $147 would open the door to a move lower and would favor a move to $145.
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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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