Tickers discussed: SPY, QQQ, IWM, TLT, USO, GLD, SLV, NEWR
The Daily Profit Compass provides the stock market outlook 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
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: On a day where SPY and QQQ barely moved, there was lots of churn under the surface. High flying names in the software / medical devices / payments space got whacked 5% or more in many cases while energy and financials soared with $KRE being an example up 3%. Our game plan of getting long IWM against $150 worked well with price up over $2 / 1.35% and easily outpacing the major indexes. The safety trades of gold / silver / bonds were all down.
Since the breakout last week, at least from the viewpoint of the indexes, nothing much has happened from a technical view. No further advance has occurred but neither has a decline. Therefore Traders are encouraged to have a bullish bias as long as price remains above the breakout levels from last week. Only a return to the previous trading range turns the charts decidedly bearish. On a measured move basis, the target for SPY is $302 and for QQQ is $199.
Hong Kong News: Have you noticed there have been no interviews with protest leaders? Protesters have learned since last time. When protesters last caused trouble in HK during the “Occupy Wall Street” era, the leaders were vocal and easily identified. One day they were all rounded up and thrown in jail. Problem solved. Now the protesters operate like a cloud and organize within it. Protests are coordinated via hard to trace social media applications. Protest leaders, if there are any, have stayed anonymous. Crowds form like clouds, then disappear. This is one reason the protests may persist. Finding the instigators is easier said than done.
China Fun Fact: I was stunned to learn that China maintains a “strategic pork reserve” just as other countries maintain strategic oil or gold reserves. Yep, its true. The African Swine Fever has wiped out a wide swath of the Asian pig herd causing major supply disruptions and price spikes. As a result, the natives are getting restless. So much so that China plans to release pork reserves ahead of the Fall Festival to ensure supply and stabilize prices.
Currency News: Quiet
SAFE HAVENS
Bonds. $TLT is still within a $3 trading range between $143 and $14, but just barely as price teeters on $143. Nimble active traders can play within the range while swing traders can wait for a break outside the range. Long above $146 and short below $143.
Gold : GLD has pulled back during the equity advance and nears $140.50 which is both key support and the daily pivot point. At least some buying is expected to defend this level by the bulls. If however price were to drop below then the next support comes in at $136.
Trade Idea: On a break of $140.50, get short via either $GLD puts or 3x short gold ETF DGLD. Target = $136 on GLD Use a tight stop. Right or Right out.
Silver : Unchanged. Like Gold, Silver is in pull back mode. Solid support comes in at $16.25. Notice the large volume / price bars at that location. There is also trend line support coming in at that location.
Trade Idea: If price reaches $16.25 get long Silver ( SLV ) or silver miners ( $SIL ) with a stop just below. This would also be a location to add to any pre-existing long position if you wanted to increase your exposure
$WTIC / $USO There was a change at the top of the Saudi oil ministry as MBS installs his brother to oversee things. Saudi pledges to maintain production cuts giving oil a boost. We correctly identified $12 as the bull /bear pivot. Price has closed above it so $12 becomes support.
Trade Idea: Stay long against $12. Price targets shown on the chart annotations.
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 )
Strategy Update: Time to re-assess the market.
No Changes. Still watching carefully to see if the breakout holds. Although I have added a long position or two, not piling into bullish positions at this time. If the breakout is legit and prices go higher, I am fine paying higher prices. If the breakout is legit there will be plenty of time to add long exposure.
Risk off trades begin to crack. Still no appreciable bid. I still have exposure to Gold and Silver miners which may prove to be a mistake; stops quickly being approached. If Bonds / Precious metals continue to sell off, it would be supportive of higher equity prices.
$SPY Daily
With price only moving 15 cents, no technical changes from yesterday. With prices above $297, all-time highs are within reason with $301 then $306 as targets. If price loses $297, a dramatic move lower to $294 is favored with a gap fill.
Swing Traders: Stay long against $297 with an eye on T1 at $301. Below $297 and things get iffy with a huge gap all the way down to $294. Bears: On a break below $297, get short for a gap fill to $294. All bets are off if $294 breaks as it would signal a failed move which is very bearish.
SPY 60 min: Traders can be long above $299 and Short below $297. The $2 trading range is wide enough for nimble day traders to profitably trade inside the range by selling resistance and buying support.
$QQQ Daily
Price tested the low side of the trading range and was generally weak all day. It remains in a trading range between $191.20 and $192.20 since breaking out last week. Below $191.20 is a lot of open air. Above $192 and the measured move target comes into focus at $199
Swing Traders: If long, Stay long against $190.22. Bulls last level of support is $190.22 which is the gap entry location. Below $190.22 and bears will likely take price to $188.33 to fill the gap.
QQQ 60 min:
Boldly mark $190.22 on your chart. This is the gap entry location test 2x in yesterday’s session. A break below offers a high-probability of a gap fill to $188.33. Get short on a break of $190.22. Bulls are ok above $190.22 but need a move above $192.15 to get some upside momentum going.
$IWM Daily
Yesterday’s $2 advance brings price to the top of the range and just below the 200ema. I suspect the 200ema may be a problem but if price can pop $152.50, it has some room to run.
Swing Traders: $152.50 remains the first target above $150 but if you got long at $150 be prepared for a possible rejection at $152 ( 200ema ) or $152.50 ( lateral resistance ). IWM will likely need help from QQQ / SPY before it can go much further. Bears: Watch for the above scenario with a rejection off of either $152 or $152.50 as a place to short for a run back to $150.
IWM 60 min
Use $152.50 your key level. A move above and bulls can either add to their positions or start a new one against $152.50. If price cant break through, bears can shoot against $152.50 w/ a stop just above for a move back down to $150.
********************** TRADES *************************************
Open Trade Set ups
$NEWR – get short on a bearish continuation move below $54.83
$TLT get short on a break of support at $143
Trade Ideas:
KSU long on weekly breakout to 5yr highs – working as price advances
EDU long on a weekly breakout to multi year highs. – working, holding breakout
Triggered Trades – None
Open Positions
QURE Oct $45 P at $3.61 – Bearish continuation breakdown
OLLI Oct 62.5 C at $2.29 for gap fill
GDX Oct 30 C at $1.47
WPM Oct 30 C at $1.32
KL Sept 45 C
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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