Tickers discussed: SPY, QQQ, IWM, TLT, USO, $WTIC, BOOT, SBUX, PGR, EL, BABA
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.
Earnings Calendar
$FDX and $ADBE after the bell. .
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: Despite the moonshots for any energy production related stocks, the major averages drifted lower for the most past with 8 of 11 SPDR sectors in the red. It’s important to realize that energy is only 4% of the S&P weighting. Energy can keep going to the moon and it wont move the needle. Tech, financials and discretionary move SPY
This morning, TLT is moving higher and Gold erased red and is toggling green.
I expect the indexes to slow down today and into tomorrow. A good time to chill in my opinion ahead of the FOMC.
S&P Leaders
S&P Laggards
Pre-FOMC positioning
Traders are encouraged to review positions and exposure ahead of the FOMC announcement. Treat the FOMC rate decision as an earnings event where you have no edge. I’d discourage adding exposure ahead of the meeting; trim any positions where you have nice profits that you don’t want to see evaporate.
Hong Kong News: A prominent spokesperson for the protesters is making the rounds in Washington DC informing lawmakers of the situation. It takes real courage to do what he is doing. Many before him have ended up in a Northernn China “fingernail factory ” or worse. He must be respected for his efforts.
China News: Quiet
Currency News: YUAN weakened.
SAFE HAVENS
Bonds. Bond prices had a momentum overshoot below $137.50 but have now recovered above key support. Odds now favor a higher bounce at a minimum, but if $137.50 breaks again it will likely be the real deal. Bullish positions are favored above $137.50; bearish positions favored below.
Keep in mind the FOMC rate decision will likely move the needle here. Be careful holding through Wednesday’s announcement.
$WTIC / $USO The spike in prices has left a huge gap below and as we’ve seen so many times, gaps get filled. Even if you don’t typically trade oil, alarm the gap on USO. When ever it triggers be it next week or next month, get short for the gap fill. A straightforward trade at an objective, low-risk location.
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
Bulls remain in control unless / until prices return to the consolidation area ( below $294 in SPY and below $189 on QQQ ) Taking a cautious view ahead of the FOMC; plan to mostly be a spectator. 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
No technical changes from yesterday as price moves to stall speed ahead of the FOMC meeting. Near term, $299 is the gateway to lower prices while $301 and higher will open path to new highs. Although I suspect a narrow trading range leading into the FOMC in past cycles the drift has been higher.
Swing Traders: If you’re already long, 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: Nimble traders can use $301, $299, $297 and $294 as key levels to trade in and around. Price should react as each level of downside support is tested. To my eye prices below $299 and things may get iffy for bulls. Below $299, bears can get short and look for $297 then $294 as downside targets. Think about heading into the FOMC flat unless you like extreme theme park rides.
$QQQ Daily
After we had the doji type day last Thursday, Price has been drifting lower and now sits on a ledge of support at $191. Additionally its easy to see that price is now below the rising wedge. A drop below $191 would favor another test of $189. The FAAMG names have been weak and when the top 5 names comprise such a huge percentage of the index by cap weight, the Q’s simply are not going to do anything.
Swing Traders: $191 is a key level to hold in any pullback and should be regarded as a near term bull / bear pivot. A move below $189 would be very bearish. Any moves above the old high would be bullish.
QQQ 60 min:
I’d get short below $191 and position for a possible move to $189. Prices above $191 are short term bullish. Bigger picture, prices above $189 are bullish while a dip back below $189 would be bearish because it would indicate a failed breakout. Use the marked levels for reference when actively trading.
$IWM Daily
Look at the price bars on the daily. What do you notice? To my eye I see the multiple long “wicks” on the daily candles that reach far above $158 but yet repeatedly close just below $158. There is real trepidation to close above. All of this probing makes the price level all the more important. If you see an impulsive, definitive pop and hold above $158, get long against the breakout. A lot will depend on general market conditions and if the “dash for trash” trade continues.
Swing Traders: With price at resistance, the default position is that it holds until it doesnt. I favor a pull back at key resistance given that resistance has held all year. Price has to prove it now.
IWM 60 min
Keep it simple and visual; $158.50 – $159 is key resistance and $156.50 is first support. Nimble , active traders can trade in an around these levels. Breaks below $156.50 would be bearish while a break above $159 may initiate a move that points to $170 as a measured move target.
************************** TRADES **********************************
Trade Ideas and Set ups
$PGR – Range break trade set up favors further downside below the 200ema
$BABA Alarm $179 / $180 area for breakout and run to $190 if market stays constructive.
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$SBUX – Down another 1% and destined to find the TL for a key test. Either a great value buy at that location if it holds or a short entry if it doesnt.
$EL – Well on its way to filling the gap
$BOOT – Still on the doorstep; Threatening to breakout
Triggered Trades – None
Open Positions
YUMC Oct 47.5 C at 1.96
QURE Oct $45 P at $3.61 –
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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