Tickers discussed: SPY QQQ IWM TLT GDX
The Weekend Profit Navigator takes a look at the big picture and provides the stock market analysis for the week. Key levels and trading locations are provided, along with trading plans and timely commentary to keep you on the right side of the trade
Supplemental Companion Video
Trader’s Couch:
Meditation helps Ray Dalio;
Maybe it will help you
If you’ve been following me for any length of time you know that “calming the mind” is a critical part of trading success. Just within the past month we have had deep overnight sell offs that were subsequently bought up. But in that moment when ES futures were off 50 handles, were you mortified or calm? On Friday, when we saw the biggest red bar since early October, did you face it with inner calm and fortitude or mild to moderate terror? Were you able to take advantage and make money ( or simply hedge out your long book ) or were you discombobulated with your hair on fire? Meditation is a way to calm those raging emotions within. A quiet mind is a mind that can see clearly. Clear-eyed thinking is helpful with trading. If you wrestle with emotions as we all do, I encourage you to give meditation a try. If it helps Ray Dalio, maybe it will help you. When you think about it, you’ve got nothing to lose.
Earnings Calendar – The week is loaded with Risk and Opportunity
Earnings really ramps up this week and it could not come at a more critical time. Key FAAMG names headline the week along with several marquis names in other sectors. AAPL / AMD / BA / TSLA / MCD / SBUX / MSFT / FB / AMZN / V / XOM / CAT / Lots of market cap here that will most assuredly move the market one way or another.
The Week just past and a look ahead
One & done or something more?
That is the question on everyone’s mind after Friday’s price action where the broad market indexes sold off around 1% primarily on corona virus fears. Looking back over the run up from the October 3 low, its looks like the biggest red bar since then. So while a one day selloff doesn’t constitute a trend change, Friday’s action is notable and should not be dismissed.
Over the past 6 weeks or so, I’ve been harping on you to continue to raise stops and and to keep risk at manageable levels. We all know the market is extended and overbought and is therefore more vulnerable to corrective activity. We also said that the week after op-ex is often a time when market shifts take place and another reason for caution. While definitely a couple of days late, it was recommended that traders take opening positions in TLT and GDX on Thursday. That looks smart now; we will see how it plays out going forward.
The Week Ahead
The week ahead is loaded with risk and in my view the risk is greater than the opportunity. The FAAMG names have had a tremendous run. Imagine if you’re long all those names with massive embedded gains. Would you be pressing for more into earnings or inclined to take some profits ahead of the print? Good earnings may not be good enough. I am not sure. We’ve also got the FOMC rate decision on Wednesday. While no immediate change in policy has been signaled or expected, in recent weeks, voting members have voiced concerns over asset valuations and linked them to the Fed balance sheet expansion. Any Powell fumble in the presser or signal that REPO liquidity injections will be reduced later this spring will be taken as a negative. My inclination, as it always is, will be to step aside most of the week and base move off the reactions to the new information.
Current Positioning
On Friday I closed my equity longs even though no great damage had been done. I am long TLT and GDX, and am short QQQ and IWM. I am also short a few individual names. The thinking there is the corona virus will get worse before it gets better and I took the calculated risk that the market will either pause Monday ahead of the FOMC and big-cap earnings or be down on new virus news. I plan to flatten my shorts to AAPL reporting Tuesday AMC and the FOMC on Wednesday at 2pm. .
Let’s Dive into the Charts
Bond bears got nuttin ( so far )
One part of the great reflation trade thesis is a rising rate environment. That thesis has not played out thus far at all and I don’t think it is all related to the corona virus. . Rates have been trapped in a narrow range well below 2% and have not showed any meaningful inclination to move higher. So there remains a viscous bid for treasuries by traders. I still think the path of least resistance for rates is lower and for TLT higher.
GDX Gold Miners
The long gold miner trade is off to a good start. A break above T1 is the next hurdle. A break below the uptrend line kills the trade.
Index Deep Dive.
SPY 60min
A break back below $328 favors a move to test $327. Below $327 then $325.50 and the gap below is your next target. A move back above $329.45 opens the door to a back test of $331 which was a key level of support.
SPY Daily
A break below the Friday close opens the door to a 20ema test at $226.50. A move below opens the door to $325. A move above $332.50 would largely negate Friday’s bearish engulfing candle.
SPY Weekly
A weekly close below $325 would open the door to a larger corrective move to the bottom of the channel. Note the lack of structural support below $325.
QQQ 60min Chart
A break below $222.50 opens the door to test gap support at $221. A move back above the breakdown candle at $223.75 averts the immediate danger. 
QQQ Daily
A daily close below $222.50 favors a test of the 20ema near $218. A break of the rising channel would initiate a sell signal on the daily chart and favor lower prices.
QQQ Weekly
The weekly doji at the top of an extended run is a cautionary candle. A red candle this week would favor more downside. A break of the dashed uptrend line around $218 would favor more downside.
IWM 60 min
A move below $164.75 would favor a move to test the gap at $163.80. A break into the gap favors a gap fill to $162.50. A move above $166 averts near term danger.
IWM Daily
$166 is a good go/ no go line. Below $166 keeps door open for a 50ema test and gap test at $163.80. Above $166 is more constructive. Keep in mind that I am talking about daily closes, not intra-day action. Price could dive to tag the 50ema and bounce, so keep that in mind.
IWM Weekly
Until price can break above the prior high and resistance at $170ish, the chart will continue to have that double top look. A weekly close below $162.50 would favor a back test of the breakout around $159. I’d expect bulls to make a stand there at least for a bounce. If you were short, I’d cover at that level, then re-initiate on a break below. If price breaks below the breakout level, then the bottom of the trading range near $143 becomes the technical target.
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