While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
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MDR Long @ $9.31
MDR Short Nov $10 Call @ $0.25
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Yesterday the market continued its bearish bias. But, with a close percentage of 8% on Monday, we knew the odds of violating Monday's low before the high was around 90%.
And that is what happened.
By the way, if you do day trade, these are the setups to look for. You want a daily bar with a high of low close percentage where the odds of violating the low or the highs are very high.
Then go to a short term intra day chart and look for an entry.
I like a 3 minute chart for this strategy.
By following this simple strategy, you could have bought puts on the SPY around 11:00 EST when it was trading around 275. From there, it dropped to a low of almost 271 by 3:30 EST.
That is a drop of 4 points. This was enough of a move to move the 274.50 put from a low of 1.11 to a high of 3.50.
Pretty decent leverage for a Tuesday. But, if this move happened on a Friday, you may have been able to buy the same put for about 60 cents.
Even better leverage. That is why if these type of setups happen on a Friday, they become even better for leveraging purposes.
Back to the market.
For the day, the S & P 500 closed to the downside, 4.04 points at 2,722.18.
This was the second close under 2,731.90, so the bias is for a drop to 2,695.
And this was the second day where the S & P 500 closed under the midband which is 2,747.84.
This level should be resistance. And I would want to see two closes above it to even consider that this pullback is over.
Yesterday's daily bar did close at 18% of the range, so the bias is still to the downside. On the upside, we know resistance is at the midband which is 2,748. And resistance from yesterday's daily bar is in the 2,726 to 2,735 area.
Pre open, the S & P 500 is trading about 4 points higher. This projects to an open right at the lower resistance level.
Earnings continue this week. The big report that will be closely followed will be Nvidia. NVDA reports Wednesday after the close.
Continue to monitor the levels as I mentioned.
Here are the Key Levels for the Markets:
$VIX:
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00 <
Minor level: 23.44
Minor level: 20.31 **
Major level: 18.75
Minor level: 17.19
Minor level: 14.06
Major level: 12.50
The VIX closed at 20.11. So, yesterday had the divergence between the VIX and the S & P 500. Both closed to the upside.
With a failure to close above 20.31 yesterday, the VIX will still need two closes above 20.31 to move up to 25.
The VIX is sitting right on the midband on its 30 minute chart. That level is 20.62. The VIX would have to clear that level to move higher. But, at this point, it should be resistance.
21.88 is minor resistance. And 18.75 is support.
SPX:
Major level: 2,841.80
Minor level: 2,829.60
Minor level: 2,805.20
Major level: 2,793.00
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10
Minor level: 2,731.90 **
Minor level: 2,707.50
Major level: 2,695.30 <
The downside objective for the S & P 500 should be to 2,695.30. This would mean the higher levels should be resistance.
2,749 should be resistance. And minor support is at 2,700 and 2,703.
Also, look for resistance at 2,739.30.
QQQ:
Major level: 178.13
Minor level: 179.69
Minor level: 176.56 **
Major level: 175.00
Minor level: 173.44
Minor level: 170.31
Major level: 168.75
Minor level: 167.19 **
Minor level: 164.06
Major level: 162.50 <
The QQQ closed at 166.47. Biased for a drop to 162.50.
Yesterday saw the second close under the major 168.75 level. This now sets up a scenario where the QQQ could drop as low as 150.
With the QQQ trading under the midband which is 169, I would expect resistance at that level. Also, the major 175 level should be resistance.
168.75 should also be resistance.
IWM:
Major level: 162.50
Minor level: 160.94
Minor level: 157.81
Major level: 156.25
Minor level: 154.69 **
Minor level: 151.56
Major level: 150.00 <
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
The IWM closed at 150.55. The midband should be resistance which is 158.
Watch to see if the 150 level holds any support at all. 153.13 should be minor resistance. And there is technical resistance right at that level.
TLT:
Major level: 115.63
Minor level: 115.24
Minor level: 114.45
Major level: 114.06 Hit!
Minor level: 113.67
Minor level: 112.89 **
Major level: 112.50
Minor level: 112.11
Minor level: 111.33
Major level: 110.94
The TLT closed at 114.02. To move higher, the TLT will need to move above 114.45.
I don't see this bounce moving higher than 115.63. If it does, the bounce could go as high as 118.
113.48 is short term support.
GLD:
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
Minor level: 114.85 **
Minor level: 113.28
Major level: 112.50 <
Minor level: 111.72
Minor level: 110.16
Major level: 109.38
The GLD closed at 113.70. Short term oversold, so I expect a bounce to happen.
113.28 is support. But if the GLD breaks under it, expect it to move lower. 114.84 is resistance.
XLE:
Minor level: 72.66
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
Major level: 68.75 <
Minor level: 67.97 **
Minor level: 66.41
Major level: 65.63 <
Minor level: 64.85
Minor level: 63.28
Major level: 62.50
The XLE closed at 65.54. "A close today under 67.97 and the XLE should drop to 65.53." From yesterday ... hit already.
The short term, 30 minute chart has crossed into an uptrend. And the midband is 69. The XLE will need to clear this level to move higher.
Also, for the XLE to move higher, it will need two closes above 66.41.
FXY:
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
Minor level: 84.58
Major level: 84.38 <
Minor level: 84.18
Minor level: 83.79 **
Major level: 83.59 <
The FXY closed at 83.99. It did close above 83.79 today, so it should head up to 84.38.
Watch to see if the FXY can clear 84.38. If it can, it should bounce off its oversold condition.
AAPL:
Minor level: 214.06
Major level: 212.50
Minor level: 210.94
Minor level: 207.81
Major level: 206.25
Minor level: 204.69
Minor level: 201.56
Major level: 200.00 <
Minor level: 198.44 **
Minor level: 195.31
Major level: 193.75
Apple closed at 192.23. It took out the 193.75 objective.
If Apple has two closes under 193.75, it could drop to as low as 175. And yesterday was the first close under it.
187.50 is the midband on the daily chart. 195.31 is minor resistance and minor support is at 190.63.
WATCH LIST:
Bullish Stocks: CMG, COST, CME, ZBRA, CLX, DXCM, DIS, DATA, HSY, GPC, ESRX, UAL, EXR, WBA, LW
Bearish Stocks: NVDA, FB, CXO, FANG, EA, CLB, SLB, SRCL, WDC
Be sure to check earnings release dates.
