Weekend Profit Navigator Sep 27

Tickers discussed: SPY / QQQ / IWM / World Market Overview   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

Protecting your Emotional Capital and dealing with Emotional Drawdowns 

Traders are quite familiar with financial capital. It is the currency by which we measure our progress as traders. We are taught to guard our trading capital as we would our life because after all, for a trader, trading capital is life. Once your trading capital is gone, you are out.  That concept is pretty well understood by most traders.

That said, how many of you are equally aware of your emotional capital balance?  Emotional capital is just as important as financial capital because how we feel greatly impacts what we do and how we do it. If for any reason we experience an “Emotional drawdown” it will affect how we trade.  Emotional drawdowns can be a result of a financial drawdown in our account resulting from poor trading or market conditions. It can also be the result of “real world difficulties” like relationship troubles that bleed into our trading lives to impact our trading.

To use the metaphor of the gas tank, its vital for traders to understand the level of their emotional gas tank.   Is it full with feelings of unbridled confidence and optimism or is it “running on empty” with feelings of despair and hopelessness?  Simply recognizing where you are is important.

If you feel you’re in an emotional drawdown due to trading, take a step back and reassess with clear-eyed realism what is happening.  This is where a set of objective outside eyes from a fellow trader, mentorship group, or trading coach can help.  When you’re in the middle of something, it’s often difficult to see what is happening when to others it is often quite easy.

Here are a few Action Activities you can do when facing an emotional drawdown. 

Preventing emotional drawdowns in the first place

Steven Covey, business management author, was a big advocate of “Sharpening the Saw”.   Another way of saying to make having fun or doing relaxing things a structural part of what you do and how you operate.  That might be 2 weekend getaways a month or “no chart Sundays”. Whatever you need to do to re-charge your emotional batteries.  Some people find that recharge in spiritual endeavors such as worship or meditation, while others experience rejuvenation fly fishing or riding their bike.   The way you accomplish your “recharge” is unimportant. What is important is that you do it regularly, because once your emotional capital goes empty, it is very difficult to get re-charged.  When that happens it may take months or possibly years of backing away from markets

Earnings 

Micron should provide a good early read on Semi Sector on Tuesday after the bell.

What to watch for Next Week.

Key Levels and Technicals on the Indexes

  • SPY –  Bulls need to take out $330 to sustain Friday’s bullish move. Then recapture the 50ema, and push toward $341.50.
    • The Sell signals are still in effect on the daily but with a push the bulls can take out downtrend resistance and build some tailwinds.
  • QQQ – The weekly PPO put in a bearish cross which usually dont turn on a dime, but if bulls can move above $275 and then $280 it would sure look like a short term bottom was in.  Watch the FATMAAN names in conjunction with QQQ. If the bears cant break these names, the Q’s cant head lower. They are 44% of QQQ.
  • IWM – Hard to get too bullish with price at $147. Lots of work to do to get this bullish on longer time frames.  Price needs to get above $150 and hold it before we get too bulled up.  If money flows back into tech, hard to see money flowing into cyclicals and beaten down names as well.

Political Rancor 

  • Supreme Court fight
  • First debate Tuesday night has the potential to move the needle if either candidate walks away with a clear victory.
  • Covid relief prospects before the election remain dim.

The US Dollar 

  • A lot of directional  bias for metals, commodities and equities will likely swing with the Dollar.
  • My bias is higher for the Dollar but these things have so many moving parts we will need to wait and see.
  • We’ve seen in recent days when the Dollar is rising, many asset classes have a hard time doing the same.

Strategy Update

Back to neutral 

  • Nothing changes perception like price.
  • Bears were not able to crack QQQ or the FATMAAN names. Open to a short term bottom being put in but 1-2% days lately have been the norm. I am not simply assuming Friday was necessarily some big bull run, though it could be. Got to wait n see.
  • We are on daily sell signal across the indexes and even weekly trendlines have been violated.
  • I still believe we are in a tactical environment.
  • Can’t see piling into names / indexes / sectors while they are below the 50ema. If that level is recaptured, then yes, that is objective level to shoot against.

World Market Overview  ( Weekly Charts )

Even if you choose not to trade them, World Markets are a smart thing to regularly check in on. There are some troubling signs in these markets as some are clearly starting to break down and others beginning to do so. While we’ve seen periods of US Markets completely disregarding these markets, I don’t think you can simply assume it will always be the case. In bull mode, you’d like to see most of the world markets in sync.

$DAX – Germany

Trading ETF is EWG / HEWG   Most highly correlated market to US. Price needs to hold that 11,900 area which has been a reliable bull / bear pivot in recent years.  Note the bearish curl on the PPO and rejection of the RSI at trend resistance.

$BSE – India

Trading ETF is NFTY / INDA / INDA  Bad week at the office dropping 5% or so. Key off 36000. Price needs to hold that level or the snow ball picks up speed.

BSVP – Brazil

Trading ETF is EWZ   Price sitting on the 40 week ema with the PPO about to execute a bear cross. Stay bearish below the well defined down trend line.  90,000 is first support then 82500

$NIKK – Japan

Trading ETF is DXJ or EWJ  One of the stronger looking world markets. Watch for a hold of 23000 level and / or a potential breakout above 24000. Notice the PPO beginning to curl lower and RSI at trend resistance.

$SSEC – China

Trading ETF is FXI   Testing the low side of the consolidation range. If copper breaks down, I expect this will too. Key Spot

$HSI – Hong Kong

Trading ETF is EWH.  Disastrous week. Down 5%, falling from its consolidation triangle.  PPO rolling over below the zero line and RSI pinned below 50 are very bearish looks. A move below 22500 sends it to the March lows and possibly lower.  Rough looking chart and outlook.  Below the March low and the 2016 lows come into focus which is WAY down there.

$KOPSI – So. Korea

Trading ETF: EWY.  A break of 2250 likely sends the index toward a test of the 40 week ema at 2125.  In the week head focus on whether or not the PPO executes a high-level bearish cross.

Index Charts.

$SPY 2 hour

On Friday, bulls were able to break price above the falling wedge. THat said, price was again stopped at prior lateral resistance at $330.  A break above would open the door for a move higher toward $336 and then $341.50.  For the bears to gain traction, they have first have got to stem the advance, then take out the prior low below $320 to bring in more selling.   Were we seeing on Friday the beginning of a big advance or just more whipsaw action as volatility has increased.?  Time will tell, but from a trading perspective we don’t need to really need to know those answers. What matters is if price recaptures levels from below its bullish. So tomorrow, if price recaptures $330 you can get long against that level with a stop below and look above to $336 and then $341.50 as upside targets.

Note that the SELL signals on the daily chart are still in effect.

QQQ 2 hour

Breaking above $268 / $270 resistance layer was a nice milestone on Friday.  Now the bullish objectives are $275 and $280. A move above $280 would likely open the door for a run at new highs or close to it. For trading, price is in no man’s land. Sit tight for either a move above $275 or a break back below $268. Those are your objective trade locations. Bears would likely need a break below $260 to usher in a move lower toward $255 or possibly $250.

$IWM 2 hour chart

Here too, price broke above the falling wedge, but the move was more muted than with SPY / QQQ.   Price ran into trouble at $147.   Tomorrow $147 will serve as a nice bull / bear pivot for active traders. Above and traders can be long against $147 w/ a stop just below. The above target is $149 where there is overhead resistance. If price is rejected  at $147 than its back toward $144 and $142 area. A break of last weeks low would likely usher in more sellers. $140, then $136 are your downside targets on such a move.

 

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