Tickers discussed: SPY, QQQ, IWM, TLT, USO, GLD, GDX, $TM, $YUMC, $BABA
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: It looks like another “Risk Free Friday” is shaping up as all green is flashing across the futures quotes. Somebody went back through all the Friday’s in 2019 and found just a handful of instances where SPY closed red.
Yesterday was interesting on the safety trade front. After the ECB / Draghi announced a 10bps rate cut and re-engagement of 25 billion euros worth of QE a month in November, gold spiked $20++ and rates fell. By the end of the day, gold had lost a majority of those gains and rates were rising. Despite Gold giving back much of those initial gains, Gold has recaptured $1500 and is at a key support area. If you want to start building a position now is the time. Price is at a nice trade location with a clear area of support to let you know you’re wrong.
SPY and QQQ squeezed higher while IWM took the day off with some consolidation after a 3 day moonshot $6 move. As you review the charts, take note of the divergent highs in SPY / QQQ within their rising wedges. The big red bar in the final hour of yesterdays trading shows you how fast a correction in this type of set up can start. Be careful. Move up your stops and know your exit points if corrective activity presents itself.
Leading Industry Groups
Materials and base metals / Consumer finance / Financial administration / business support services / Gambling / Defense
Lagging Industry Groups.
Drug Retailing / Trucking / Healthcare providers / Energy -related groups / Hotels
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 then $306 and for QQQ is $195 then $199.
Hong Kong News: HK Exchange continues it’s attempt to buy the London Stock Exchange
China News: China continues to make overtures to buy more American Ag and Pork products while seeking an interim peace treaty on trade.
Currency News: Surprisingly, the Euro strengthened after the ECB policy moves
SAFE HAVENS
Bonds. To be frank, the trading levels have been spot on and have been a great guide to trading this. Notice how price has consolidated / hesitated at each level before moving lower. The bounces if you can call them that have been weak and the down moves fast. Until price can recapture a level or build a base at support, the bias has to be lower. $137.50 is the last stop out of dodge. If price loses $137.50 it will fall very fast with little to no structural support. Even if you have not made a dime in this trade so far, alarm $137.50. It will either be a great place to buy or sell. We will have to wait n see.
Gold : $GLD is at support and offers a good trade location for a move higher. Use $1500 as a bull / bear pivot in the price of the metal. Above $1500 is ok for longs, below more iffy.
$GDX Bad day at the office for $GDX. A big bearish engulfing candle favors a move to support at $26.25. Set your sights at that level both if you’re a bull or a bear. Critical spot
$WTIC / $USO Oil took a 3% plunge on the open but by the end of the session had recovered over 1/2 of those losses. $11.40 is a key level on USO. A hold above that level keeps a door open for a move back to $11.50 while a break below favors a move to $11.10. All eyes are on US-Iran relations. An easing of oil sanctions would likely flood the market and cause price to plummet. Remember, Trump would likely love to point to low prices at the pump in 2020.
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 FOMC rate decisions. Slow and steady wins the race. 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 and Silver stopped going down and have made small advances in the face of rising equity prices. TLT needs to stabilize. Too early to call a bottom, but seems like a change of character.
$SPY Daily
Price continued higher with a small advance within the rising wedge. Note the spinning top doji candle at the top of the range. Signals indecision and a possible reversal point. A red candle today would tend to confirm a price change. That said bulls remain in charge until proven otherwise. Upside targets are new ATH’s 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: watch for a break of the rising wedge. Really the key level is $297. On a break below $297, get short for a gap fill to $294.
SPY 60 min: Price broke out and now targets ATH’s. After that $306. 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
$QQQ Daily
Price continues to flirt with the prior highs. Traders should remain aware of the bearish divergences that are present as price reaches the old high but with lower indicator levels. Bearish divergence is not a sell signal. It requires a trigger which would be a break below the uptrend line.
Swing Traders: $191 is a key level to hold in any pullback. A move below $189 would be very bearish. Any moves above the old high would obviously be bullish.
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. I’d be concerned with retracements below $191. Breaks of the 60m uptrend line would be a bearish technical event. All that said, bulls in control until proven otherwise.
$IWM Daily
Price is consolidating the $6 3-day advance above support near the highs. Bulls in control above $156.50.
Swing Traders: Stay long. the next target is $158.50, then $160. Move stops up to $156.25. If price moves below $156.50 a short term correction is favored.
IWM 60 min
No Changes as price consolidates at the highs. Keep it simple and visual; $156.50 is now support. Bulls can use this line to shoot against with either new or existing positions. 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
$TM A breakout to all-time highs sets up as a nice long against $132.5
TLT – Use levels on 60min chart for a guide. Bearish bias until price proves otherwise
$BABA Alarm $179 / $180 area for breakout and run to $190 if market stays constructive.
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$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.
Trade Ideas:
KSU long on weekly breakout to 5yr highs – holding the breakout.
EDU long on a weekly breakout to multi year highs. – a little wobbly as price pulls in a little. Honor your stop if in it.
Triggered Trades
$YUMC. Nice breakout. Long October 47.5C @ $1.96 against $47.
Open Positions
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
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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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