Daily Profit Compass September 6

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:   As we anticipated and suspected,  they popped resistance and gapped up overnight thus denying longs a nice entry and denying shorts a good exit.  Once the market opened price advanced before settling into a fairly narrow trading range.  There was some softness at the close, but nothing major yet.

We have the Non Farm Payrolls at 8.30am today and Jerome Powell speaks at 12.30.  Both of these could be market movers so stay on your toes.  We are looking for continued validation of this break out.  Really, as long as price holds $294 on SPY and stays above the prior trading range, the breakout has technical validity.

Possible Balance Area / Trading Range Outcomes

Take note of the possible out comes.   Given the morning gap up and over resistance, it will be either Scenario 1: Gap n Go or Scenario 2: Look above and Fail.   One is very bullish and one is very bearish.  We should know soon.

Bonds.   $TLT pulled in a little as yields backed up. Below is the 60m chart of TLT.  In yesterday’s trading, price found support at $144 and then put in what could be interpreted as a bear flag.  I’d really like to see price find the $143 / 143.25 zone. of interest.  From there we can decide whether to play for a bounce or a short if support fails.   Currently, price is in no man’s land between support and resistance so there is not a clean look for a trade.

Hong Kong News:   Fitch lowers HK’s credit from AA+ to AA.  HK’s first credit downgrade since 1995 which seems notable.  I am seeing reports that the protesters will continue this weekend despite the extradition law being formally withdrawn.

Currency News:   Watch how the $USD reacts to the NFP numbers this morning.

Gold / Silver :  GLD was down 2.4% and SLV was down 5% as the risk-on rally took its toll on safe haven assets.

From a technical perspective, I want to see price hold $17.50 on silver to close the week at support. A close below open the door to a further pull back to $16.50 at R1. Given Silver futures are down 2.5% in the premarket, that may be a tall ask, but we’ve got a busy day of trading ahead of us. Let’s see how it turns out.

$WTIC / $USO   Oil rocketed higher off the strong move in equities but at the end of the day, they faded 100% of the move.  From the USO 60min chart you can see the pinpoint tag of the $12 key resistance level followed by the fade back to support. From here  $11.57 – $11.66 is a zone of support.  Prices below $11.55 and the uptrend line open the door to lower prices.

Things that make you go Hummmmm……….It is very interesting to me that the monster fade today was completely opposite of what you’d expect on a bold risk -on day.  Is oil wrong or is the equity rally fake, or neither.  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.

I will be very interested to see how price reacts to the non-farm payrolls and Jay Powell today at 12.30pm.    If price holds $294 through next week, bearish views will start diminishing, especially if price drives higher.  Staying patient at this end. Not motivated to load the portfolio with longs over the next week.  If the breakout is legit there will be plenty of time to add long exposure.

 Risk off trades begin to crack.  One thing in favor of the breakout being legit is that the safety trades showed their first signs of cracking as bonds and metals backed off their previously torrid advance.   Watching closely.

$SPY Daily

Price had a nice breakout that is holding $297.   With prices above $297,  all-time highs are within reason with $301 as a first target.  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:   Price is set to open around $296.50 as I write this.  A quick back fill of the gap below to $294 with a hold there would be healthy and a positive for bulls.  For a gap n go scenario, $297 is now key overhead resistance.  If price moves back below $294 it would be a very bearish development.  Note the bearish divergences on the indicators.  Price making relative highs, but indicators at lower levels.

$QQQ Daily

$191 is a key level because that was the original breakout level in the Spring. Bulls want to see this level hold.  Prices below $191 has risk of further downside. Be aware of the gap between $190.39 – $188.33.   Prices below $189 would signal a failed breakout and thus would be bearish with lower prices favored.

Swing Traders:    Stay long against $191 if you are long. Bulls last level of support is $190.39 which is the gap entry location.  Below $190.39 and bears will likely take price to $188.33

QQQ 60 min:

$191.40ish level is important. Nimble traders could short on a breakdown and target yesterday’s opening print at $190.39.  Below $190.39 is a big gap all the way to $188.33.  Prices above $191.40 keeps the prior highs of $195 in focus as a target

$IWM  Daily

Price went up for a near perfect tag of the 200ema and then closed below the 50ema.  IWM remains a relative under-performer compared to SPY / QQQ as it remains both the 50ema and 200ema’s.  Bulls are ok above $150; below $150 and things get iffy.

Swing Traders:   $152.50 is the first target as long as price holds $150.  Below $150 price is vulnerable to a gap fll down to $147.84

IWM 60 min

Use $150 as your bull / bear pivot.

Above $150 and $152.50 is your first target.    Below $150 targets gap support at $149.37.  Below $149.37 targets a gap fill to $147.34.

 

Open Trade Set ups – None

Trade Ideas:

KSU long on weekly breakout to 5yr highs

EDU long on a weekly breakout to multi year highs.

Triggered Trades –  None

Open Positions

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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