Tickers discussed: SPY, QQQ, IWM, ITB, TSM, TXN
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
Trader’s Couch – Understanding the Universal Laws
If you spend any amount of time thinking about or studying the great spiritual traditions you’ll find great alignment between them, although said in different ways. It’s when people distort the teachings to serve their own purposes that we get into trouble. Here the Buddha conveys Universal Laws that apply to us all.
1. Thoughts are Things: The mind works to deliver the things we think about most often and most passionately about. If you’ve been obsessing about the possibility of getting cancer your entire life, don’t be surprised when you’re handed that diagnosis. If however, you’ve been thinking about becoming a great trader, don’t be awestruck when you arrive at that destination.
2. Law of Attraction: The world works to align itself to and with the energy you emit. For instance, vibrant people attract other vibrant people. If you find yourself in the company of people you don’t really like, admire or respect, look in the mirror. There is something in the energy you are giving off that is attracting those people to you.
3. Imagination unlocks creativity: If you think something is impossible it most likely is ( for you ). It’s called a mental barrier for a reason. The flip side of that is working on having an expansive imagination / can-do attitude. That approach unlocks both the conscious and un-conscious mind to work on whatever task / goal you’re imagining to accomplish. Over time you’ll create what you once imagined.
These Universal Laws are working around the clock whether we recognize and leverage them or not. They can be applied to personal relationships, sales goals, or trading, it doesn’t matter. So if one of your big goals is to become an accomplished trader, there is really nothing in your way that can not be overcome. Align these Universal Laws to your thinking and actions and the world will align itself to you and your goals and help make it happen.
- Asian and US Markets quiet heading into a big week for macro events ( FOMC, UK Vote, New Tariff deadline )
- HK faces “worst ever” store closures and layoffs as protests dig into economy
- China faces unprecedented second annual decline for Auto Sector
- MSFT begins work on JEDI project despite AMZN protest
Market Observations, Technical Developments, Outlook, and Strategy
The market on Friday continued higher with a gig gap up after the strong payroll report showing 266,000 had been added with unemployment ticking down to 3.5%.
So although Monday and Tuesday’s corrective activity served to close a gap below, 2 new gaps have been created since the mid-week turn around. While the price action has been bullish the technical structure below remains weak and subject to swift downdrafts whenever selling takes place.
THis week is loaded with macro as the FOMC has a rate decision announcement on Wednesday at 2pm, UK has an election with BREXIT the main policy matter, and new tariffs are scheduled for Sunday December 15. While all this is going on, the FED continues to inject liquidity daily. At the end of the day, maybe that is all the market needs…that daily fix of liquidity.
Strategy Update: Lots of distractions out there to knock us off our game if we let them. Do your best to focus on price. Mark your gaps, know your levels. React to price input not headlines. Be open to multiple outcomes. Envision yourself watching price as a leaf on a stream. Track its progress through the currents. Accept its meanderings with openness and without bias. You wouldnt be upset with a leaf for moving left or right on a stream; try not to be upset if price moves up or down based on market activity. Simply go with the flow and align yourself with the path of least resistance which is currently higher.
- 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 vol, poor market structure loaded with gaps ) collectively they simply mean to be careful.
- Nothing truly bad can happen unless SPY $301 fails or QQQ $194 fails. That said, those key support levels are getting farther and farther away.
- 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 Daily – Alarm your gaps along with OH resistance at $315.50. A move above $315.50 opens the door to higher prices while a move back into the gap below favors a quick $2 move lower.
Swing Traders. With a Price move and hold above $315.50, it would be an objective place to add or initiate a long.
$SPY 60min chart
Bear Set up: A break below of $314.11 favors a gap fill to $312. From there watch to see if selling morphs into something more.
Bull Set up: No Changes. $315.50 is OH resistance. Above are new highs with no natural sellers. Gaps below and bearish divergences are present but those are not sell signals.
Price is above all moving averages which are bullishly stacked. The chart is bullish. Unless price looses the 8 and 20 emas, there is nothing bearish in the chart other than the negative divergences that have persisted for months.
Swing Traders Stay long against $204 regardless of where you entered on this cycle. A drop below $204 signals a move lower. A move below last weeks low around $199.85 would likely mean a trend change is underway.
QQQ 60 min
Bear Set up: A gap entry at $204.15 would favor a move to $202.83 so it would be worthwhile to try a short if price moves into the big gap.
Bull Set up: Prices above $204 are bullish. If price moves above $206 then new highs are indicated and stops can and should be raised.
Prices above $162.50 are bullish but a move below $162.50 likely results in a gap fill $1.50 lower. Bigger picture anything above $160 is bullish and offers the possibility of a catch up move to the low $170’s if the market remain productive.
$IWM 60 min
Bear Set up: Get short on a break below $162.50 and be looking to cover at least 1/2 at $161.
Bull Set up:
Bulls can add or initiate longs with a move and hold above $163 with a tight stop below. Exit short term positions if price drops below $162.50 as a sizable gap fill would be favored.
************************** TRADE Updates ******************************
$KL long Jan 40C / GDX long Jan 27C / XRT short w/ Dec 44P no action; holding all for now.
Added GTT FEB 15 C at $1.15 on Friday.
PANW Dec 6 227.5 / 230 / $232.50 call butterfly. Closed Friday for $300 gain.
**************************** Trade Set ups and Charts ********************
$TSM Taiwan Semi is breaking higher from a consolidation area. I like it long against $94
$TXN – Texas Instruments has price entering a $6 gap on Friday. I think you can be long this one above $121.
$ITB Homebuilders are pressing against $46 with a nice ascending triangle. THe set up favors a breakout but no need to front run. Alarm the level and take it on a breakout and then set a stop below.
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