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: The index sell off yesterday ranged from 0.58% to 1.5% as global sentiment turned dark over the 3-day weekend as new tariffs kicked in and with the US – China trade negotiators finding it difficult even to schedule a meeting. The US Manufacturing ISM print made things worse as it showed manufacturing sector slipping into contraction.
Don’t worry though, Futures are boldly green this morning as Hong Kong Executive Governor Carrie Lam signals she is ready to withdraw the China extradition law that sparked 3 months of protests. Time will tell if calm is restored or if the concession emboldens protesters more because their efforts are paying off.
Bonds. Flat at / near recent highs. Uneventful day as bond prices consolidate between $143 and $148. Nimble traders can trade the wide -range bull flag. My bias is to the upside so any price move to the low side of the flag is an opportunity to build a position. The “let’s short bonds” crowd has been foiled thus far, but a move below $143 would be a technical signal for bulls to exit.
Currency News: British Pound sees volatile action as the UK struggles with Brexit considerations.; $USD continues to hold it’s bid at / near highs; YUAN: stable.
Gold / Silver : GLD was up 1.4% while SLV went beast mode up 4.4%. I am long gold and silver miners
Gold has moved quickly through the volume / price air pocket where resistance was almost non-existent. Now as price approaches $150, things will get tougher as overhead resistance gets thicker. Expect a healthy consolidation in or around $150. Ultimately I think price moves higher. Traders without a position should keep an eye on $150. A breakout above that level would be an objective place to either locate a long or add to an existing position.
Silver is moving into a zone of low price / volume resistance so I think price will find the 2016 high of $19.50 sooner rather than later. If price were to consolidate here, just above $18.50, it would be a great place to establish a long position with a tight stop just below $18.50.
Oil— Another down day as price lost 2.1% . Price has dropped below it’s consolidation triangle and the door is open for a test of prior lows near $51. Traders should now maintain a bearish bias until price proves otherwise. I have the following levels as support. $54.80 / 54.15 / $53.50 / 52.90 / 50.90 ( from the 60m chart ) I am short $USO via Puts
Hong Kong: Embattled executive Governor Carrie Lam signals she is ready to withdraw the controversial Chin a extradition law.
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.
Price moved lower toward the battleground level of $290 but was unable to move below. This morning with futures on the rise, the upper resistance zones of $293 – $294 again come into focus.
Expect continued volatility until this wide-range consolidation zone is resolved either to the upside or downside.
GAP Open: Price is anticipated to have an opening gap higher. Be on the lookout for a flash move lower to fill that gap.
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: All eyes are on $293 and $294 as locations that have capped all prior advances. These are objective shorting locations for nimble traders with stops just above. A sustained break above $294 will emboldened bulls and would signal their control of the tape. Watch out for a flash gap fill lower as futures are pointing to a gap open.
Price is set to open appreciably higher than yesterdays close. That said, unless and until $190 is taken out the song remains the same. Chop chop chop.
GAPs: There will likely be a sizable gap formed below on the open. Watch for a flash gap fill lower.
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.
$189 = gap entry $190 = gap fill and breakout resistance
$185.50 / 186.50 / 187.50 are intermediate support and resistance levels within the chop zone. Price has been trading well to the technicals.
If price were to get to $189 it would be an objective shorting location with a stop just above. A break and hold above $190 would signal the bulls have taken control.
IWM closed lower and under performed the other indexes. Given IWM’s persistent under performance I think leaning into bearish positioning is an easier call. If price were to take out $150 then that opens up IWM to a bigger upside move. Otherwise I think fading moves into resistance is the right call.
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
Price is set to open at / near $148 which is a key location on the chart. A break above and hold is a nice location for a long entry w/ a tight stop. Look for a move to $150. If however, price is capped at $148, traders could establish a short and look for a back fill of the open gap below.
Open Trade Set ups – None
Triggered Trades – None
XBI Sept 80p at 2.84
GDX Oct 30 C at $1.47
WPM Oct 30 C at $1.32
CAR Sept 25P
EWH Dec 21P
$KRE Sept $48P at 1.48
KL Sept 45 C
PAAS Oct 18C
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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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