Weekend Profit Navigator Sep 20

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Tickers discussed: SPY / QQQ / IWM / XLB / XLC / XLI / XLU / XLV / FB / AAPL / AMZN / MSFT / GOOGL / NFLX / TSLA  Strategy update

The Weekend Profit Navigator provides a big picture stock market analysis for the week just past with a look ahead. 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

Pick a strategy, stick with it, then focus on execution. 

Short-termism has invaded almost every facet of life from relationships, to politics, to corporate governance, and yes even trading as evidenced by the dramatic spike in option volume for contracts expiring in 2 weeks or less. 

From what I see in the mentorship groups I host and observe in the trading community, short-termism has also infected trader’s views about their trading strategy. Trying out a strategy out for a couple of months, then moving on to the next shiny object that seems appealing after they don’t get the results they were hoping for in the original strategy. Listen. There are 1000’s of ways to make money in the market.  The spectrum spans the gamut from  scalpers reading candles on a 3 min chart to Warren Buffet buying “wonderful companies” at a discount and holding them for 50 years.  Successful traders know who they are, pick a strategy that is in alignment with their personality, then spend the rest of their careers honing their craft and becoming masters of their strategy.  If you are constantly switching strategies, you’ll never get past being a rookie trying to execute it.  The key is picking a simple strategy that you can repeatedly execute and sticking with it.  Focus on execution. Fine tune around the edges once your confidence and mastery grow.

Companion Video

The Video provides a detailed look at the week that was in the markets and offers key thoughts and trade locations for the week ahead on the indexes, key SPDR Sector ETF’s and FATMAAN names. Timely commentary is aimed at keeping you on the right side of the trade.

Tickers: SPY / QQQ / IWM / XLB / XLC / XLI / XLU / XLV / FB / AAPL / AMZN / MSFT / GOOGL / NFLX / TSLA

Earnings 

What to watch for Next Week.

Key Levels and Technicals on the Indexes

  • SPY –  Bulls need to hold $330, recapture the 50ema, and push toward $342.50. If Bears decisively break $330, the low $320’s are targeted.
    • On the Weekly, watch to see if the Bear PPO cross is executed. If so it favors a deeper pull back.
  • QQQ – Bulls need to step in big time to avert a bear PPO cross on the weekly.  Aside from TSLA, the FATMAAN names remain incredibly weak and comprise 44% of QQQ
  • IWM – Outperforming the other indexes as money flows into value and smaller cap names which have dramatically underperformed. Recapturing $155, then 157.50 would be significant technical moves and bode well for further upside. That said, if SPY / QQQ make down moves, it will be hard for IWM to do the opposite. Key off the levels and let them be your ultimate guide. Don’t lock in on a thesis. Follow price action.

Political Chaos, Justice Ginsburg’s passing, and prospects for the Covid Relief Package

  • Last week saw prospects for a compromise Covid Relief Package rising.  Those prospects evaporated with Justice Ginsburg’s passing.
  • Ginsburg’s passing has sucked all the oxygen out of the compromise room.
  • The stakes over the election have been elevated and an all out political war is breaking out.
  • Legal challenges to the election results are already underway BEFORE the election. After the election, there will be more.
  • The prospect of a 4-4 deadlocked Supreme Court for these rulings is elevated.
  • Taken all together, it means increased volatility over the next 8 weeks and possibly longer.
  • Added vol is the environment, and it does not necessarily mean lower prices.
  • Remain focused on price with the above as a backdrop.

Strategy Update

Leaning Bearish, but not gonzo bearish ( yet ) 

  • Led by FATMAAN names ( aside from TSLA ) the down draft is concentrated in QQQ but at 44% of the Q’s its significant. Also those 6 names are 20% of SPY.  Hard to overcome those percentages with small cap names.
  • We are on daily sell signal across the indexes and even weekly trendlines have been violated.  If bear PPO crosses execute on SPY and QQQ it will further advance the bear case for a deeper pull back.
  • Still no fear as evidenced by lack of put buying. I do not think there will be a durable low with folks still buying calls.
  • The lack of short interest and put buying in general mean there are no natural buyers ( shorts covering ) on any further down drafts. This means down moves can go further than they normally would.
  • This could be a decisive week from a technical perspective.
  • Bears are in control but price wise the Bulls can still save this. The question is will they.

Market Factoids

End of Quarter rebalancing outflow possibilities

Most Shorted Stocks

Lack of Liquidity has the potential to exacerbate moves

Short Interest in FANG names remains low.

Put to Call Extreme-o-meter

No fear and PUT HATE rolls on. Need to see fear and extreme put buying IMO before durable low is found.

$VIX

Index Charts.

$SPY Daily

SPY Weekly

QQQ Daily

QQQ Weekly

$IWM Daily

$IWM Weekly

 

 

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