No no no, stay away from the rubbing compound!

Car wax isn't meant to take out water spots. You need to clean the paint by using polish. The polish should smooth out the paint and get rid of both your water spots and swirl marks. Afterwards, go ahead and apply your wax to the affected area to protect it from the elements.

Rubbing compound is much, much too aggressive! Don't even try to apply just to take out water spots!

There are a lot of good polishes available out there. I'm sure someone local can give approximate costs and where to get them.

Good luck!