Tickers discussed: SPY, QQQ, IWM, FB, SQ, CHWY, TXRH, QSR
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 Retail earnings pick up this week. HD / KSS / URBN / LOW / TGT / LB / M / JWN KSS off 10% and HD off 5% this morning after earnings.
Market Observations, Technical Developments, Outlook, and Strategy
Levitation
No changes or departures from the character of the market. While there was a little excitement just before the opening bell with a mini-rug pull, prices quickly found support as the algos went into “nibble mode”. Just a relentless bid with ultra tiny candles. IWM had a remarkable afternoon trading within a 20cent range for over 4 hours. Weird stuff.This morning, we again are looking at a gap open higher of about 7 points on /ES.
Defensive issues led while shares of $FB lifted the $XLC. While I try to stay away from big proclamations ( that will be used against me when I am wrong ) the energy group that was so hot just a week ago has gone cold. Oil was off as much as 1.75% yesterday before cutting losses into the close, but are now down 1% pre-market. Lots of energy -related names have been peppering my “losers list”. If you go to the $XLE Weekly chart, you’ll see the price rally was stoned exactly on the well-established down trend line and now has fallen below. I think traders have reverted to growth fear mode.
As you can see from the Put / Call chart, the extreme call buying continues. That has yet to slow the market down at all. Just another yellow flag in the wall of worry as the indexes grind higher. 
Strategy Update: No changes. In my opinion, now isnt the time to mash the gas pedal. 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.
- 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.
$TLT Bonds: Price has recovered after putting in what could be a bear trap low. I think traders can be long against $137.50
$SPY Daily –
No changes. Price remains well above the 8ema and all the ema’s remain bullishly stacked, so from a price perspective it couldnt be more bullish. The first signs of a pullback is when price begins to close below the 8ema. Swing Traders. Above $301 and bulls remain in control. Swing traders who are long from lower levels may want to consider raising stops from $307.66 to $309.55. This level would allow for a pull back to fill the gap but would get you out if gap support did not hold. Feel free to set your stops according to your risk tolerance but I do think you need to be raising your stops methodically through this bull phase. Bottom line, have a long bias and a short leash. 
$SPY 60 minute chart
Bear Set up: Trying to call tops is a losing game. The first level that is objective is the gap opening at $310.26. If price falls below you can try for a gap fill and add to the position if price falls below 309.55. Other than that, I dont see much worth shooting at.
Bull Set up: Support zones are at $310.26, $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 – No changes to technical picture.
Swing Traders. Bulls in full control so your bias should be to look for entry points if / when you see a pull back to a marked level. Place stops just below in case the pull back morphs into something more. With price above the rising 8ema not a lot to worry about on the downside. Sit taller in your chair if price closes below its 8ema. 
QQQ 60 min
Bear Set up: 202., 201.43, $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: Honor what ever stops you have in place. Watch price action at / near support levels for signs of buying. Play level to level. 
$IWM Daily No changes to the technical picture as price remains trapped between $157.50 and $160.
Swing Traders. Stay long against $157.50 and short against $157.50 with a break below. A break above $160 that holds will be a great place to anchor a long for those that have been on the sidelines waiting for a decisive move. 
$IWM 60 min You can see the well defined trading range between $157.50 – $160. Price action between the range is choppy but wide enough to trade if you’re sharp and nimble.
Bear Set up: Short below $157.50 w/ stop just above.
Bull Set up: Above $157.50 and bulls are ok. A break above $160 breathes new life into IWM with a chance to make a run at old highs. 
************************** TRADES **********************************
$CHWY – A name we alarmed the other day, triggered and fell sharply intra-day. At least a couple in the group took the trade and are up nicely. While anything can happen, I see more downside. 
$DPZ Weekly Worth an alarm at $295 as a location of interest. THat level has been a wall for 18mo but if market rips we could see a bold breakout to new highs.
$QSR Weekly I expect price to find $63 in the weeks ahead. THat should be a support level that you’d expect told hold. Worth an alarm. Probably not worth trying to short at this point.
$TXRH Bracket the recent trading range with alarms at 60.50 and 56. Nice $6 gap below and room to run above.
$SQ Price putting what looks like a rounded bottom. I’d like to see price clear resistance at $67 to initiate a long against the 200ema. They’ll be some OH resistance at $71, but then an open gap to $81. Big upside potential here.
$FB With a break above $197.50 this looks like a long with an eye on $205.
