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 market remains choppy and sensitive to political and trade headlines. All the main indexes were down led by IWM down 2..4% and QQQ down 1.78%. The SPY was down only 1% as XLU and XLP hit highs.
Bonds and other safe havens like Gold and silver were choppy and have settled near support. The $USD hit a 2 year high and is in no doubt making it tough for the metals to advance.
The VIX looks poised for a moonshot as technical triggers are lining up for a big move higher. THe chart is below showing the details.
Many of my risk on / risk off variables are leaning risk off, but as we’ve seen before, all it take is 2 tweets and those factors will flip on a dime.
Although I am positioned bearishly, this market remains a “jump ball” and therefore either the bulls or bears remained positioned to take control.
$SPY 2 hour
Bullish Factors: Price still well above the uptrend line off the June low and thus still has an upward bias.
Bearish Factors: The near term outlook is bearish because price remains pinned below the 2 hour downtrend line.
Bottom Line: Below the downtrend line the bias has to be bearish. If price can take out the downtrend line and $297.50 in particular, the path would clear for yet another attempt at the highs. $295.50 has been a key level and remains so. Below $295.50 my near-term target is $292. A move below $292 would be pretty bearish.
Trade Ideas: Below the DT line, maintain a bearish bias; above, get bullish. If price is below $295.50 use it to shoot against on the down side and look for $292. Expect a bounce at $292 if you get there.Below $292 add to short exposure.
$QQQ 2 hour
Bullish Factors: Short term, none. Longer term price is still above the weekly uptrend line ( not shown ) but is testing it now. Bulls need a green week.
Bearish Factors: Price has broken below the uptrend line off the June lows and remains below the 2 hour downtrend line. The indicators remain weak and are in their bearish regimes.
Bottom Line: As it stands now, the breakout failed because price is below the breakout level of $188.50 / $189. Anybody who bought the breakout is underwater. Traders should maintain a bearish short term bias with price on the wrong side of both the June uptrend line and downtrend off the highs. A break above the downtrend line negates the bear set up short term. For now, look for a test of $183.
Trade ideas: Any kick back to $188.50, if it happens quickly should be faded. A break out above the downtrend line and / or $188.50 can be used as a long trade location with a stop just below.
$IWM 2 hour
Bullish Factors: Price is near support at $150.50 and proximity to the downtrend line is close. A bounce that takes out the downtrend line would be bullish.
Bearish Factors: Price going straight down out of the double top look and respecting the downtrend line the whole way.
Bottom Line: $150.50 is a key level of interest. A bounce could spark a near term rally but bigger picture is bearish. A break below $150.50 would likely usher in a fresh wave of selling.
Trade Ideas: Use $150.50 as a bull / bear pivot point for short term trading. A break below is a place to add to shorts. If $150.5 holds, traders can be long with a target of the DT line. A break above the DT line would be a place to add.
Risk On or Risk Off ??
After the risk-on inflection point in early September, all the risk- on indicators have rolled over. While this is short term bearish it should be noted that these indicators ( on the hourly chart ) can and do change quickly.
$VIX Daily
The VIX seems poised for a moonshot as the RSI has broken out and the PPO has put in a bull cross as price puts in 4 closes above support. A close above $18 begins the launch sequence.
SPDR Sector Deep Dive
XLB – Materials
Bullish Factors: The indicators remain above their center lines and price is above the 40 week ema. Price above first support at $57.50
Bearish Factors: The rejection at OH resistance is bearish and the chart has a double top look. A break below $57.50 would be bearish.
Bottom Line: Price needs to take out $59.25 to invalidate the double top look. A break above and price would be in a position to reach for a run at old highs. A break below $57.50 probably sends price lower to test the rising 40ema.
Trade Ideas: Bears; if you shorted off the top, stay short and add if $57.50 breaks. Bull; if you see $57.50 hold, get long with a stop just below and add if price takes out the prior high.
$XLC – Communications
Bullish Factors: Price above the 40 week ema.
Bearish Factors: Price closed below the bull / bear pivot at $49.50.
Bottom Line: Price is testing the uptrend line off the 2018 low. A break below is bearish while a hold keeps bulls hopes alive. .
Trade Ideas: If price reclaims $49.50 and holds trend, then that would be a nice place for a new long. Bears, if price breaks below the uptrend line, hit it and use $49.60 as your stop with $48 as a first target.
$XLE – Energy
Bullish Factors: Bullish factors fading after a false breakout.
Bearish Factors: Price action broke above resistance but then closed below both technical resistance and the 40week ema giving the price action a failed breakout look that is bearish.
Bottom Line: Price looks headed for $57.50 after the failed breakout. A break above the downtrend line changes the picture.
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
No technical changes with price moving 1 cent all week
Bullish Factors: No downside support violations keep bulls in charge.
Bearish Factors: Nothing substantial yet.
Bottom Line: Expect choppy action between $29 and $27.75. Obviously moves in interest rates will be key to the sector. Rates on the 10 year remain volatile. Bulls need a breakout in yields to help the financials higher.
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: Price is near all time highs and the indicators are above their centerlines.
Bearish Factors: From a price action perspective you never want to see price breakout then immediately fail and fall back below. Failed breakouts are bearish.
Bottom Line: While we are only talking about a few cents, price breaking back below $78 after breaking out is bearish. If bulls can pop price back above they can negate last weeks failed move. Otherwise the bears are apt to sink their teeth into this and drive price lower.
Trade Ideas: Bears, use the failed breakout and close proximity to the key level and get short against $78. It is a very objective and low-risk trade location. If price pops above and holds, close the position. Bulls need to wait for the break out to hold to get long or add to existing positions.
$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: 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 and loses $59 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 dashed 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 having the best performance last week and at all-time highs. No red bars for 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: Bull factors faded quickly with a bad week at the office. Bulls need to regroup at $88 to mount a defense at support.
Bearish Factors: Price broke below the Bull / bear pivot at $90 and price is also below the 40week ema.
Bottom Line: With fading indicators and with price below the 40ema and bull / bear pivot, the bias now favors the bears. Bulls have a chance to save further pain with a defense at $88.
Trade Ideas: Bears; Stay or get short against $90. If $88 fails, it would be a place to either add to or begin a new short position. Bulls: If $88 holds you can be long against it but a more conservative play would be to see if price can recapture $90 and the 40week ema to get long.
$XLY – Consumer Discretionary
Bullish Factors: 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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