Tickers discussed: SPY, QQQ, IWM, TLT, USO, GLD, SLV, HUBS, MO, KEYS, FDX, OKTA
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 earnings was a disaster last night. Both a top and bottom line miss topped off with a guidance cut for 2020. The stock is off $20 from yesterday’s close and is testing key 3 year support at $150.
While some of $FDX’s troubles are likely self inflicted, I dont think all of them can. FedEx is well run and their tentacles span the globe. When management says shipping volumes are shrinking and that they are reducing shipping capacity I think we need to take them at their word.
The gap down and key support test give this name a nice potential as a trading vehicle in the weeks ahead.
Market Observations, Technical Developments, Outlook, and Strategy
Market Recap: For many traders, today will be a day for a primal scream as the markets react to whatever the Fed may say or do today, often in an unpredictable fashion. Policy decisions aside, Chairman Powell has demonstrated a clunky communication style that has proven to upset markets.
Yesterday, SPY and QQQ traded in an ultra narrow range for most of the day until a late day ramp moved to close mini gaps created on the Monday open. All this didnt amount to much of a move. IWM lagged. Expect slow trading ahead of the FOMC announcement at 2pm.
Under the Hood
Half of Monday’s oil spike was taken back in Tuesday’s trading with Saudi assurances that they are quickly getting back online. Many oil service and production names were off 3-5%. The recent rotation coupled with the supply scare lifted oil names over the past 2 weeks. Many of them are at or near support. Could be some fertile shorts out there, especially if they fade this oil move 100%.
Another group that was hit hard was apparel and broadline retailers. JWN was off 10%. $M, $KSS, $GPS and many other apparel names were off hard. Like the oil names, this group has had a swift and remarkable run the past 2 weeks. It’s amazing how fast these ramp / reversal cycles are taking place.
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: Island Governor Carrie Lam says that further concessions to the protesters is doubtful adding that at this point it would be pointless. Protests are set to begin their 4th month this weekend. All this as Congress considers HK sanctions linked to political repression. Remember Oct 1 marks the 70th anniversary of party rule in China. Xi would like the HK mess to go away before then to ensure a peaceful and trouble free celebration.
China News: Quiet
Currency News: Quiet
SAFE HAVENS
Bonds. Bond prices are in bounce mode. Too early to call a downtrend reversal; could simply be an oversold bounce. We should know more after the FOMC’s rate decision and how the markets react.
For trading TLT, the levels on the 60m chart have worked well. Use them as a guide as you trade from level to level.
$WTIC / $USO Half of the oil gap has been filled in just one day. That $12.10 level on USO is the gateway for lower prices. Even if you did not participate thusfar in the move, there is still money to be made here. A hold of $12.10 makes the move look like a deep retracement. A break of $12.10 favors lower prices and ultimately a 100% gap fill down near $11.45.
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 )
Gold Gold showed signs of a breakout but fizzled near the end of the day. On futures, ( /GC ) $1500 and $1492 are key levels. Below $1492 leaves the door open to lower prices. Prices subject to change after the FOMC decision and forward guidance.
Silver Much like Gold, Silver started the session strong before backing off into the close.
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. Markets are at 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
No technical changes. Price continues to drift ahead of the FOMC. There is a ledge of support at $191 and below is key support at $189. A drop below $191 would favor another test of $189. The FAAMG names remain fairly weak and need to get going if QQQ’s are going to have a material and durable advance.
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
Price remains pinned under $158. For me that is the bull / bear pivot for a longer term move. After the FOMC reaction settles out, a move above would likely signal a sustained move higher. If price remains below, it likely signals a move back down to the lower part of the range.
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.
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Trade Ideas and Set ups
$HUBS – Beautiful set up for a try at a long w/ price sitting on key support. Bears can alarm the level for possible break. If support does break this probably goes way down. This is a perfect example of an objective, low-risk trade location. You know exactly what you’re shooting against and you know exactly when / if you’re wrong. And that location is close by.
$MO Altria has a JUUL problem. NY has just banned the flavored varieties and other states will soon follow. China is also getting in the act as JUUL’s product was pulled off the shelves with no explanation. From a technical view, price is sitting on key support. Needs to hold or lower prices are favored. Please pull up a weekly chart for reference as well.
$KEYS Price breaking higher above the range after a power gap. Strong chart that favors higher prices if QQQ remains strong.
$OKTA Price has found support at the 200ema and high volume / price bar. Chart looks constructive for a long against $100. A break of $100 favors a move to $85 where the next level of support resides.
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$FDX Back in focus with price opening near $150 this morning. The 5 yr view shows how important $150 is. A break below favors a move to the 2016 lows. Watch closely how this behaves in and around this level. The company lowered 2020 guidance so from that perspective there are not a lot of fundamentals to look forward to. If institutions abandon the name, it could move quickly.
Triggered Trades
Took a long position in Gold with October 142 / 146 call spread at $1.25 with a stop at 50% of premium paid. Small starter position.
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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