Tickers discussed:  SPY, QQQ, IWM, PLUG, YUM, ENPH, DIS

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  

Thought for the Day

As we come down the home stretch for 2019, it’s usually a time for reflection and to make plans for 2020.  As you begin to assess whether you had a great year or not so great a year, don’t fail to give thanks for even having the opportunity to trade.  You’ve seen the statistics. Very few Americans even own stocks, let alone trade them.  If you are reading this message, you are in an even slimmer percentage of people with the resources of both time and money to be trading securities. In addition to congratulating yourself on your success, don’t forget to thank those in your circle who are supporting you and helping you make it happen.  We’ll have plenty of time to work on our 2020 game plan together in the weeks ahead, but for this holiday weekend, make sure you recognize and thank all those around you for their efforts. So in that spirit, I thank you for being here and being part of our growing community. You inspire me everyday to work harder and be of greater service.   In your own way, you’re making me a better trader and a better teacher.   Enjoy the holidays!

Headlines

  •  China’s industrial profits drop 9.9 % YoY signaling a continued slowdown
  • Disney +  gaining 1M subs a day
  • NYC bans all flavored e-cigs
  • Federal prosecutors launch criminal opioid probe; JNJ, ABC, CAH, MCK shares hit
  • 8.30am  Durable goods / Chicago PMI / GDP    10am Personal spending  / 10.30 Oil inventories  / 1pm NatGas inventories

Earnings Calendar

Market Observations, Technical Developments, Outlook,  and Strategy

Holiday week wrap up.

Yesterday earnings were led by a trio of retailers beating expectations. BBY / BURL / DKS all had gains between 8% and 18% as results and forward guidance looked optimistic.  On the downside, DLTR and PANW led the losers list with mid -teen declines.  I was able to catch a nice ride on the PANW decline which trended lower out of the gate and closed near session lows.  This earnings season has richly rewarded winners and has brutally punished losers.

On the index level small gains across the board kept talking heads on the “all-time high” narrative. I dont expect that to change through the end of this week.  Volumes will be off heading into the holiday and a 1/2 day session on Friday will likely keep things on autopilot. ( although some important data is out this morning ) This is a good time to catch up on charts, clean up loose or non-performing positions and generally get ready for the final weeks of 2019.  Lots of macro headlines are coming in early to mid-December.  UK vote on Dec 12 and a new round of tariffs are scheduled for Dec 15.  Over the past 7 weeks, hard data and negative headlines have been ignored by the market as this resilient advance continues. We’ll need to wait and see if it carries through to the new year.

 Strategy Update: 

No changes. Keep long exposure within reason and according to your overall risk tolerance.  While there are no sell signals and therefore no reason to close out whatever long positions you may have, that also does not mean to add meaningful new longs.

  • Maintain bullish bias while keeping your head on a swivel.
  • Set tight stops depending on your time frame; trim n trail
  • Keep long exposure in balance with your risk tolerance.
  • Keep some dry powder ready; a back test of the breakout levels that holds would be a great place to anchor new longs.
  • Be aware of the yellow flags; ( low volume climb, ultra low volatility, excessive bull sentiment, excessive call buying ) collectively they simply mean to be careful.
  • Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails
  • Nimble, active traders can hunt for momentum plays intra-day with the plan to close at the bell.

 Market Participant Positioning.  As we move forward, keep in mind that as we moved into thin air over the past couple weeks, it has been on low volume with most of the shorts either being dead or squeezed out.  Having shorts in the market provide a buffer on the way down as they cover to take profits.  With short exposure lower than normal, that buffer wont be there so faster downside moves can happen.  Additionally, there may be weak-handed longs out there that were happy to milk every last cent of the rally but may hit the exits quickly at the first sign of trouble.  These are not predictions, just a heads up that if sell-side activity ramps, prices may fall further and faster than what you’d normally expect.

$SPY DailyFor those long SPY from lower levels, consider raising stops to just below $312.  $312 marks the top of the gap and moves below would favor a gap fill to $311. From there $308 comes up fast. Regardless of the exact level you choose, IMO it’s time to raise whatever stops you have in place.

Swing Traders.  No reason to close longs until you see daily closes below $312.  Bottom line, maintain a long bias and a short leash.

$SPY 60min chart

Bear Set up:  Limit bear ideas to a gap fill trade on a break of $312. If it morphs into something more, you’ll already be in.  Calling tops in this market has been a losing trade. Keep that in mind. Bull Set up:   Support zones are at  $312, $309.55, 308, 307,  and $304.75. Traders can nibble on long positions with a tight stop below and play for a bounce. 

$QQQ Daily

I think stops should be raised to somewhere between $202.67 and $203.5 depending on your risk tolerance. $202.67 is the gap entry.  Wouldnt take much to revisit $200.50. Dont see any reason to give up $3+.  You can re-load on any pullbacks to support.

Swing Traders  Bulls in full control but watch for a bear PPO cross on the 60min chart which would likely signal a short -term pull back. 

QQQ 60 min

Bear Set up:  Breaks below $203.50, $202.67, 201.83,  $200.50, $199.85, $199, and $197.63 are price support levels and objective places to either add to or initiate short positions.  Like SPY, QQQ is in an uptrend so keep it real on position-sizing. Bulls may decide to defend any of the levels listed above so be ready for bounces.

Bull Set up: 

Reset your stops. The levels noted in the Bear section mark levels where price should bounce / be defended. Those are locations to try for longs.  Play level to level.

$IWM  Daily

Price put in an indecisive doji candle yesterday. Would have prefered a nice follow through to Monday’s breakout but didnt get it. Still, anything above $160 is bullish while breaks below $160 get iffy. IMO any back test of $160 that holds is a place to either add to or initiate a new long.

Swing Traders.   Stay long against $160 with an eye on the old high near $173 over time. A break back below and close beneath $160 would be a bearish event. 

$IWM 60 min Bear Set up:  No short set ups unless price closes below $160.

Bull Set up:  Stay long against $160 and look for pull backs to add.     

 

**************************  TRADE Ideas  and updates on other charts   **********************************

$PLUG  Price breaking from a nice bull flag that projects a move to $4.80.  Notice the massive volume coming in.  Getting long against $3.70 is the play. 

$YUM – Nice 2% off the move away from support.  Hope some of you folks grabbed it.  If price can clear $100 and the 20ema, here comes $103 and a test of the overhead gap.

 

 $ENPH – Alarm $22 for entry into a $3.50 gap. Needs to clear the 50ema to open the path to higher prices and hopefully a gap fill up at $25.50 ish.

 

 $DIS – On the break above $150, I bought the DIS Dec 152.50 Call.  Looking for continued positive news flow about sub growth and general market conditions to move price higher.   Stop = $149.

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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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