Tickers discussed:  SPY, QQQ, IWM, TLT, USO, PLNT

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.

Quote of the Day

GAPS : SHAK , EVER, CHGG, WLK, TECK, UBER second day plays / bracket trade ideas.

Earnings Calendar

Earnings after the bell had a few fireworks. Active traders may find nice trading opportunities in these names: MTCH, WW, SWIR, PLT, GWPH, FANG

Market Observations, Technical Developments, Outlook,  and Strategy
Time for a pause

The broad averages maintained their MO of a marginal gap up followed by a tight range with few trading opportunities. Plenty of activity in individual names under the surface. Interest rate sensitive sectors like REITS and Utilities got hit as yields backed up. Utilities triggered a sell signal and are set to fall further if rate continue to rise.

Yellow flags pile up

The yellow flags are piling up for those who care to pay attention. I am looking for a modest pull back over the next 2 weeks or so. Nothing dramatic………..maybe a back test of the breakout. If we get that back test and it holds it would add a lot of credibility to the breakout and be a technically important event. That would be a location where the bulls should really step in. If they do, I’d be a motivated buyer there.

Anyhow, here are the warning flags i see.

No Volume: You’d think there would be lots of FOMO buyers but nothing. Makes me think the marginal new buyer isnt there.

Fear / Greed: Almost pegged.

Put / Call Ratio: Hitting the lows of the year

$VIX : Low end of the range and up 2% on a green day. Things will heat up on a sustained breakout above the most recent downtrend line. You can see in prior episodes of vol expansion, it all starts with a breakout from the main downtrend line.

Strategy Update:  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. The near-term upside seems very limited given where we are both in terms of price and sentiment. I think the upside is limited. Therefore…

  • Maintain bullish bias while keeping your head on a swivel.  
  • Set tight stops depending on your time frame.
  • Keep some dry powder ready; a back test that holds would be a great place to anchor new longs.
  • Be aware of the yellow flags; collectively they simply mean be careful.
  • Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails

 Earnings Season

Lots of Bracket trade set ups for second day trades out of the earnings induced gaps.   Also, there will be tons of retail earnings coming in the back half of the season.  $XRT is a great way to play if you have a bias and want to hold through the reporting period for these retail names.

$TLT Bonds

Price needs to hold $136. Technically speaking this area should hold. A good position for establishing a long with price near key support and Equities at all-time highs. Any backoff in equities should cause this to pop. Stop should be below $136.

$WTIC  Price testing the 200ema and not far from DT resistance. Will take a lot to break through. Oil inventories this morning at 10.30.

$SPY Daily – No Changes

The 30c move did not change the technical picture. Watch for gap back fill and / or break of uptrend line. Blue skies overhead if price wants to go higher.

Swing Traders.  Above $301 and bulls remain in control. Swing traders can stay long and move stops up.  I’d consider $304.75 a tight stop, but the real test will be on a back test of the breakout at $301.  If the rally is for real, there should be a boatload of buyers at that level ready to BTD.

Bottom line, have a long bias and a short leash. The dark blue uptrend line off the October lows provides a good reference point. Above ok for bulls, below and it becomes a yellow flag.  Below $304 and we’ll probably $301 quickly.

$SPY 60 minute chart – no changes to technical picture or commentary.

Bear Set up:  Bulls are in control and breakouts are bullish not bearish. Bearish trades should revolve around the gap fills while price is above the brown uptrend line.  Below the brown line begins to favor lower prices especially if the gap at $304.74 fills.  

Bull Set up:   Maintain a long bias against the brown uptrend line.  Below it, double check your risk tolerance.  Bulls ultimate line in the sand is $301. That has to hold on any back test to keep the break out valid.

$QQQ Daily – No technical changes; No commentary adjustments

Swing Traders.  Spinning top doji after a long up-swing is not a confident look. A red candle today would favor a conclusion of a reversal however minor.  Traders can remain confidently long above the dark blue uptrend line.  Below it gets more iffy, but nothing bad can happen with price above $194.  A back-test of $194 should bring buyers in off the street if the breakout is real. Maintain long bias as no sell signals exist.

QQQ 60 min – No changes

Bear Set up:  Above the blue uptrend line the bulls are in full control. Focus short ideas on gap fill opportunities.   Below the uptrend line bears can be more aggressive w/ tight stops above.  While reversals can happen at any time for any reason or no reason, I expect $194 to be back tested.

Bull Set up:  Not much to do except stay long against the blue uptrend line and continue to ratchet up stops.  If you have an inventory of long positions you want to keep, you can use tactical shorts on downside gap fills to hedge out some / all of those potential losses.  Simply know your gap entry locations and exit targets.

$IWM  Daily – At Resistance
Price is at the top of the range at a level that has contained price for a year. A break above $160 with a hold opens the door to a run at $175ish which was the prior high in 2018.

Swing Traders.   Stay long against $157.50 and the blue uptrend line.  Below $157.50 and I’d be closing out longs and possibly flipping short as moving back into the meat of the trading range would be bearish.

$IWM 60 minute – No changes based upon small price move, but take note of the bearish PPO cross on momentum.

Bear Set up:  Objective shorting locations would be a rejection at OH resistance, on a gap entry from above,  or on a break back below $157.50.

Bull Set up:  Stay long from lower levels against $157.50. Those with no position should wait for a move above $160, then get long.

**************************  TRADES **********************************

Trade set ups

PLNT – Planet Fitness got a bounce at support after a massive round trip top. A high P/E name that has fallen out of favor in this environment. They report tomorrow so I would not advise doing anything prior to earnings except to put this on a watchlist. A move below $56 opens the door to much lower prices. A hold of $56 keeps hope alive for interest to return to the name.

I will send more ideas under separate cover after I review a bunch of charts.

Please note…..keep in mind my commentary from above. We dont have any broad market sell signals but we dont have the marginal new buyer either. Stay nimble and flexible. Maintain whatever long exposure you’re comfortable with but with a tight leash / stop.

Since I have no idea what you have, I am offering ideas and set ups that look promising to me. Be selective and take what looks good to you and in the context of your existing positions.

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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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