Tickers discussed: SPY, QQQ, IWM, TLT, USO, GLD, GDX,
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.
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: All indexes made nice advances yesterday with QQQ / SPY breaking above the consolidation ranges carved out after last week’s gap up. IWM was again up another $2 as its blistering advance continued. Overnight Trump reveals he is delaying tariffs due to go into effect Oct 1 until Oct 15. There was an initial rip on the over night session, but those gains have come way back to near flat.
The “dash for trash” trade persisted in yesterday’s session with beaten down names continuing their advance while hi-valuation names names continued to be hit. It’s important to keep in mind that the indexes and sectors are cap weighted. A 1% drop in MSFT is much more important than say a 1% advance in 20 low cap names. Keep the mega cap names on your radar. If they turn into ATM machines, the indexes will feel it despite many beaten down names advancing.
Traders should be aware that on both SPY and QQQ 60m charts that price has put in a divergent high. THat is a marginal new high in price but with the indicators at lower levels. While these should be considered weak breakouts, there is no sell signal without a trigger. Those triggers are outlined in the notes.
Also interesting is that the safety trades have stabilized and in some cases advanced. Gold was up yesterday and is now up again today. TLT and silver stabilized. The $USD was up as well. We need to pay attention for reversals in these asset classes. Before diving into the Markets, a reminder that today marks the anniversary of the 9/11 attacks. There is and are many folks still dealing with pain and loss associated with this tragedy. Take a moment and send them an encouraging prayer or thought today. They’ll appreciate it.
Traders are encouraged to maintain a bullish bias as long as price remains above the recent breakout levels. 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 $195 then $199.
Hong Kong News: Police deny a permit for this weekend’s demonstration.
China News: China seeks to narrow range of trade talk discussions by taking the “China Business Model ” off the table. Essentially what they are wanting is a soybean deal.
Currency News: Quiet.
Bonds. Price is stabilizing at $141 which is a support area. Tough call as to the direction of the next mo$TLT gave us a nice $2 move as price lost support at $143 and fell to the next level of support at $141. The next target, should $141 break, is $139.50. We had TLT on the triggered trade list; Kudos to you if you got short against $143 on the breakdown. Watch for reversals / bounces at these support locations.
Gold : GLD lost key support at $140.50 but has since recaptured it and is up another 0.5% this morning. This would be a place to start building position with a stop below at say $140 – $140.25. Big easing moves by ECB / FOMC should be supportive of higher prices in Gold.
$GDX has found some support at the 50ema. Watch for a rebound along side gold which is firming. If GDX loses this 50ema level, expect prices to fall to the next support level which is marked.
$WTIC / $USO The apparent upcoming thaw between the US and Iran have upset the oil market as new supply coming online in the face of a slowing global demand is contemplated. Oil was down almost 3% yesterday and is down about 0.75% this morning. As long as price stays below the uptrend line the bears are in control. Next support levels are clearly marked. .
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: Bulls in control
The bulls have taken control and ideas for a quick failed breakout are dimming. Selectively looking for promising set ups but am in no hurry ahead of ECB and FOMC rate decisions. If we are going to new highs and a new leg higher, there will be plenty of time to make money on the long side.
Risk off trades firming: Interesting that Gold, Silver and TLT stopped going down and have made small advances in the face of rising equity prices. Too early to call a bottom, but seems like a change of character. I
No technical changes as price continues to hold the breakout and trades within a narrow range. Upside targets are $301 then $306.
Swing Traders: Stay long against $297 with an eye on T1 at $301. Below $297 and especially $296.20 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: Price broke out and now targets $301 as a first target. Be aware of the divergent high and bearish rising wedge. A break of the wedge would be a bearish event. To my eye that is $299. Below $299 and things may get iffy for bulls. $299 to shoot against on the long side. Bears: On a break of the uptrend line, get short and set a tight stop. T1 = $297 T2 = $296.20, T3 = 294
Price broke above the high end of the trading range and now targets the prior highs at $195. First support is $192. Next levels of support are $191 and $189. Now that the breakout has already back tested $189, there should no longer be a need to revisit it. Be wary of another move back down to that level.
Swing Traders: Technically speaking, any prices above $189 are bullish but if you are adding or opening a new position $192 is your first support.
QQQ 60 min:
Note the divergent high. ( new high in price but indicators lower ) This makes the structure particularly vulnerable to a rug pull so keep that factoid tucked away when you’re about to launch an oversized position. Above $192 is bullish. I’d be concerned with retracements below $191. Breaks of the 60m uptrend line would be a bearish technical event.
You guys ought to be lovin’ this move. A $6 3-day advance doesn’t grow on trees for IWM. Enjoy and savor while you can. I said yesterday that further advances would be tougher. Obviously either wrong or it speaks to the power behind the move.
Swing Traders: Stay long. the next target is $158.50, then $160. Move stops up to $156.25
IWM 60 min
Keep it simple and visual; $156.50 is now support. Bulls can use this line to shoot against with either new or existing positions. Much below $156.25 and I’d be closing existing positions and waiting for any corrective activity to subside. THis has been a near parabolic move so a correction will be close at hand. Just dont know when or how big it will be. Dont be the guy buying the top tick. Trade location is more important than ever at this stage of the advance. Bears: the chart is bullish. Watch for trendline breaks or rejections at key levels before launching a short position. No downside catalyst so far. Respect the technical levels.
************************** TRADES **********************************
Open Trade Set ups
$NEWR – Please remove from Set up list as the stock has moved away from the trade location. I will maintain the alarms.
TLT – Use $141 as a bull / bear short term pivot. See above for details.
$MDB Set an alarm at $125 for a $20 Gap fill opportunity. Target the $125 or $120 strike at least 2 weeks out after the alarm triggers.
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
In and out of ULTA short for a loss.
TLT nice win on a breakdown from $143 to $141.
IWM long against $150 for a $4 win
QURE Oct $45 P at $3.61 – Upgraded by Mizuhno; trade not really working. Will likely close unless something dramatic happens
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
Need More Trade Ideas?
Each week, I sift through hundreds of charts looking for compelling, objective trading opportunities and send them to members of our group. Why not join us? It’s FREE. Registration takes less than 1 minute HERE
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.
Join our Trading Tribe!!
Our group of aspiring traders are into active swing trading using technical analysis to find objective, high-probability, low-risk trades. Using these processes we’ve been fortunate to be winning; not perfect but winning. If that is appealing to you, join us! I’d like to think you’d benefit from the work. You’ll get premium content 6 times a week including a copy of my Daily Profit Compass, Weekend Profit Navigator, and Trades about to Happen along with other actionable content delivered directly to your mailbox.
Registration is simple and FREE Visit our homepage HERE