Weekend Profit Navigator October 6

The Weekend Profit Navigator provides an in-depth stock market outlook for the week ahead.  Key trading levels for the indexes and the SPDR Sectors are provided with timely commentary to keep you on the right side of the trade.

The Markets from 30,000 feet

The SPY and QQQ put in perfect tags of their 40 week ema’s on Thursday following a disappointing ISM non-manufacturing print at 10am. That tag resulted in impulsive buying that carried all the way through Friday at the closing bell. Although QQQ was the only main index positive for the week, Thursday and Friday certainly left a positive feeling in the air after back-to-back strong days.

Bonds, gold and YEN were all up for the week.  Very interesting that bonds were up in the face of a viscous rally.  You’d have expected them to crater. .

The VIX took a mini moon shot early in the week but pulled back to its uptrend line on Friday.   A close below trend would give further credence to the rally.

Many of my risk on / risk off variables went further into risk off territory which was surprising. THe chart is below. are leaning risk off, but as we’ve seen before, all it take is 2 tweets and those factors will flip on a dime.

Bottom line, the indexes are still in short term downtrends. While the rally was very impressive, prices are right at important resistance levels. While below, bears still control the tape, but just barely.  With positive moves Monday / Tuesday to take out those OH resistance levels, the recent dip will look more and more like a dip that should have been bought.  Bears need to act quickly to maintain control.

$SPY  2 hour

Bullish Factors:  Big bounce off the lows has momentum behind the move.  RSI has broken above 50 and PPO has put in a bullish cross.

Bearish Factors:  Series of lower highs and lower lows is the definition of a downtrend.

Bottom Line:   While the bull move was impressive Thursday and Friday the downtrend remains in tact. A break above $295 would chip away at the bear case and a break above $297.50 would put bulls back in control.

Trade Ideas:  Below the DT line, maintain a bearish bias; above, get bullish. $295 and $297.50 are logical places to add to longs if taken out while rejections at those locations would be places for starter shorts w/ stops just above.  If price breaks above the trend line, but then moves back below, that would be bearish.  If it is not obvious, price is at a critical spot. If bulls can build on gains, they will assert more control of the tape.  If price falls back, THursday and Friday will look like a strong kick back rally that was ultimately just part of a larger downtrend.   Stay tuned!!

$QQQ  2 hour

Bullish Factors:  Big bounce off the lows with indicators moving higher to support the move.

Bearish Factors:  Price still within August trading range and still has downtrend in tact.

Bottom Line:  As it stands now, the breakout failed because price is below the breakout level of  $189.  There is a confluence of OH resistance right here. A break above would show real bull power. Recapturing the uptrend line and getting above the August trading range will be key for any further advances.  A rejection here keeps the downtrend in tact.

Trade ideas:   Bears are still in control, but not by much.  Use $189 as the bull / bear pivot for short term trading. Above and traders can get long.  Bears need to reject price here. Its a critical spot and moves much higher from here and bulls take control of the tape. The present location is objective for a short, with a stop just above.

$IWM 2 hour

Bullish Factors:  Indicators have made a positive move on the bounce.

Bearish Factors: Lower highs and lower lows; bears still in control.

Bottom Line:   If price breaks above the DT line it would be bullish, but $150.50 looms as OH resistance.  A break above $150.50 gives price room to run.  All that said, IWM has been weak and the chart as it stands is bearish.

Trade Ideas:    Unless / until price takes out $150.50 the bias should be on the bearish side. Any move to $150.50 should be sold w/ a stop just above. Use $150.50 as a bull / bear pivot point for short term trading. A break above would be a place for a long w/ a stop just below.

Risk On or Risk Off ??

After the risk-on inflection point in early September, all the risk- on indicators have rolled over.  I was surprised to see in this past week, despite the big 2-day bounce, the indicators did not improve at all, in fact they got worse.  Somebody is lying.

TLT Daily

For you aspiring chartists, this chart is a good illustration of how you can use RSI trend breakouts coupled with PPO momentum resets near the zero line to anticipate bullish moves.  Once the chart moved bullish, these 2 indicators, used together, have provided nice timing signals.

Notice at the prior peak in TLT in late August / early September how over bought RSI was and how extended PPO was. Now Price is near the highs, but with RSI and PPO reset at much lower levels.  This bodes well for price breaking out to a new high. Watch how price behaves at the prior high.

I am long TLT calls

 

 

 

 

 

 

 

 

$VIX Daily

The VIX popped to $21.50 but has since pulled back to trend.  The early week action will be key. A break back below trend will be bearish ( bullish stocks ) while a break above $18 will keep price on an upward trajectory.

I own VIX calls

 

 

 

SPDR Sector Deep Dive

XLB – Materials

Bullish Factors:  Price is above trend and the 40week ema.

Bearish Factors:  The rejection at OH resistance is bearish and the chart has a double top look.

Bottom Line:  Price took a look below trend before recovering the 40ema. Above the trend line keeps the uptrend in tact while a close below the trend line takes the chart bearish.  Bulls can use the 40ema and or the uptrend line to shoot against on the long side.  This week was a good example of the peril in front running a signal. The intra-week dip was a trap for any bears front running the weekly signal.  On a weekly chart, only weekly closes matter.

Trade Ideas:   Bulls. Use the 40ema and uptrend line as your pivot.  Above ok, below you are out.  Bears. Your entry is a close below the uptrend line.

$XLC – Communications

Bullish Factors:  Price above the 40 week ema.

Bearish Factors:  Price closed below the uptrend line and is back testing it from below.

Bottom Line:  The deep look below to tag the $47.80 price level further validates it as an important level.  To flip this chart fully bullish, price has to recapture the uptrend line.

Trade Ideas:  Aggressive bears can use the uptrend line to shoot against but with price still well above the 40ema odds probably favor higher prices. Bulls. If  price reclaims the uptrend line you could get long against it and look for a run at the recent highs.

$XLE – Energy

Bullish Factors:  Price recovered a key support level after a deep look below. Bearish Factors: Price remains below the 40week ema and down trend line. Bullish moves are countertrend and should be faded.

Bottom Line:  Price recovered $57.50 and has a chance to move higher toward the down trend line. Traders should maintain a bearish bias with price continuing to print lower highs and lower lows.  A break above the downtrend line with a hold would flip the chart bullish.

Trade Ideas:  Our crew got short this week on the break below trend. Odds favor a move lower to support.  If you are short, any move above the DT line, kill the trade. A break below $57.50 would be a place to add or begin a new short position. Bulls can look for a bounce at $57.50.

 

$XLF – Financials

Bullish Factors:  Price closed above the 40 week ema.

Bearish Factors:  Nothing substantial yet.

Bottom Line:  The perfect tag of $26.50 further validates that level as a key location and for our purposes the main bull / bear pivot. The continued strength in TLT ( rates lower ) may weight on financials.

Trade Ideas:   Price caught between support and resistance. Wait for price to move closer to either one before taking a shot.   I like trading $KRE over $XLF. You get a clearer shot at banks vs XLF which has lots of moving parts besides banks.

$XLI – Industrials

No technical changes from last week

Bullish Factors:  The deep look below and recovery of the trendline is bullish. Price above the 40ema.

Bearish Factors:  Price has failed 5x to breakout and momentum continues to fade.

Bottom Line:   Deep tag of $73 further validate that level as important.  THe chart remains bullish with price above trend.  The chart flips bearish on a break below trend, preferably below the 40 week ema.

Trade Ideas:   Bears. THere are 2 potential shorting locations. one at the top near OH resistance where price has failed to breakout 5x and on a break and close below the uptrend line.  Bulls. I suppose you can be long against the trend line but will all those failures to breakout, I’d be inclined to wait to see if price can finally break above and hold to get long.

$XLK – Technology

Bullish Factors:  Price remains well above  the 40ema and support at $78.50ish.

Bearish Factors:  Key off $78.50.  A break below is bearish.  Above keeps bulls in control.

Bottom Line:  I view XLK as a key to the market.  Big bearish ideas won’t materialize unless they break tech.   Watch FB / AAPL / AMZN / MSFT / GOOGL.  $AMZN and $FB incredibly weak; others ok so far.  $78.50 is a key level to hold for the bulls. Below and bears may get emboldened.

Trade Ideas:   No changes. In the very short term, I view $78.50 as a location for both bulls and bears to pay attention to.  Above, and bulls can run with it. Below and price may be subject to rug pulls. With price above the 40 week ema, tough to be a big time bear.

$XLP – Staples

Bullish Factors:  Everything.

Bearish Factors:  Nothing

Bottom Line:   No changes from last week.   The defensive nature of XLP names combined with the relentless search for yield have kept a bid in these names.  This will of course end badly but until price breaks trend  for starters, there is nothing to do on the short side.  Not advocating piling in long at these levels, but there is no short here and the path of least resistance remains higher. Bulls remain in full control.

Trade Ideas:   Move stops up to $60 if long.   First signs of a problem would be a break of the trend line.  If you’re long, congrats!. Stay long and trail your stops up.   Bears: lots of thin volume / price support below which means when this crowded trade ends, it should fall fast. Set yourself an alarm just below $60 for a potential break of the uptrend line.

$XLU – Utilities

Bullish Factors:  Sector remains a beast; All-time highs

Bearish Factors:  None.

Bottom Line:  No technical changes from last week. Bulls have no worries for now with the sector continuing to hold the highs.  Last week’s candle wasnt the most inspiring, but benefit of doubt resides with bulls. No red candles for weeks and weeks.  That said, dont get complacent. Trail your stops up.

Trade Ideas:   Bears trying to call tops are losing. Simple stuff here. Bulls, stay long and trail up stops.   Bears:  Wait for a trigger.

$XLV – Healthcare

Bullish Factors:  Price took a deep look below but reclaimed the $90 pivot and 40ema.

Bearish Factors: Momentum continues to ride out of town and price is below the uptrend line.

Bottom Line:  With fading indicators and with price below the uptrend line I think the chart favors bears, but not by a lot.  Bears need price below the 40ema and bull / bear pivot of $90.  Bulls can save this with a positive week

Trade Ideas:  Bears; Stay or get short with a break below $90.  If $88 fails, it would be a place to either add to or begin a new short position. Bulls: stay long against $90 w/ a stop just below.

$XLY – Consumer Discretionary

Bullish Factors: Despite the dip, Price remains well above the 40ema and the indicators remain above their centerlines.  They’ll have a hard time cracking this one unless they crack AMZN which is nearly 25% of this cap-weighted sector. The key level for $AMZN is $1752.  Below and XLY will get  iffy.

Bearish Factors:  There was bearish follow through from last week but not very impulsive.   AMZN is now below key support. If this one falls apart, it will be hard for XLY not to slide.  SBUX, another top component of XLY, broke trend this week.

Bottom Line:  This is an important offensive sector that is a good proxy for gauging risk on / risk off sentiment.   Price is now in no man’s land with little to shoot against. THe next point of interest is $116 where support and the 40ema reside.

Trade Ideas:  Odds favor a move to $116 with AMZN , SBUX and others are weak. That said, not much to shoot against.  Bold, aggressive traders could short against last weeks high and look for a move to $116.  Otherwise, sit tight and focus on $116.

 

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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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