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.
CURRENT POSITIONS:
GOGO Long at $19.93
Total Premium Collected $1.95
ASNA Long at $14.20
Total Premium Collected $0.75
DUST Long $4.50
Total Premium Collected $0.70
SNAP Long at $14.54
Total Premium Collected - $1.65
OI Long Feb $19 call @ $1.70
MDR Long @ $9.31
PHM Long Dec $25.50 put @ $0.80
PHM Short Dec $24.00 put @ ($0.35)
DDD Long at $11.97
DDD Short December $12 call @ $0.70
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I suggested you close out the DDD covered call position and take a small loss. With the selling pressure the market is experiencing, we will close long trades quickly and reduce size on new positions.
After the moderate sell off on Thursday, the market continued its strong sell off.
For the day, the S & P 500 closed 62.87 points lower. It closed at 2,633.08 which puts it back under the major 2,646.50 level.
To me, that is very significant. As I have mentioned in the past the implications of closing under 2,646.50. But, it certainly bares repeating again. The implication is simply this.
If the S & P 500 has two consecutive closes under 2,646.50, this would suggest that the downside objective for the market is to 2,500 to 2,548.
And this has been the third time the market closed under 2,646.50. On both those occasions, the S & P 500 was able to recoup that level.
The first time was on October 29th and the next day the market rallied strongly closed above 2,646.50 by around 40 points.
The next time the S & P 500 closed under 2,646.50 was on November 20th. The next day, the market recouped that level. And on the third day, it did manage to close under 2,646.50. Because they were not consecutive closes, the pattern was invalidated.
And now Friday, the S & P 500 has managed to close under 2,646.50 for the third time.
Will it close under 2,646.50 today?
We shall find out. Pre open, the S & P 500 is relatively flat. And the market would have to rally about 14 points to close above it.
The short term 30 minute chart for the S & P 500 continues to be bearish. But, interestingly enough, the 60 minute chart for the S & P 500 has crossed into an uptrend.
With bearish short term charts, you expect overhead resistance. And that would be in the 2,710 to 2,720 area.
And with the bearish long range candle from Friday, resistance from the daily bar should be in the 2,662 to 2,665 area.
Friday was a long-range candle with a range of 85.40 points as compared with an average true range of 50.94. The daily range Friday was 168% of the average. I usually consider a range of over 150% of the average as a long-range candle.
And Friday's close percentage was 12%. This puts the odds of violating the low before the high at just over 90%.
By the way, I do want to mention that Thursday's close percentage was 100% which put the odds of taking out Thursday's high before the low at 100%.
And Friday morning, the market opened with a slight gap to the downside and proceeded to rally to 2,708.54 which took out Thursday's high by just over 12 points.
This satisfied the closing percentage requirement before the market sold off all day.
The closing percentage does not mean the market should close above or below the high or low, only that it should be violated before the opposite end of the bar.
The weekly bar for the S & P 500 was also a long-range bearish bar. The range for the week was 90.53 as compared with the weekly average true range of 178.65. The range was almost 200% of the average which certainly qualifies as a long range bar.
And the weekly bar was also a key reversal bar. A key reversal bar is an outside bar which has a higher high and a lower low.
The difference between a key reversal bar and an outside bar is that the key reversal bar closes under the low of the prior bar. This does make the bar strongly bearish.
And add in the fact that the weekly bar closed at 6.5% of the bar and it puts the odds of violating the low before the high at over 90%.
Resistance from last week's weekly bar should be around 2,710.
You want to watch how the market reacts around the major 2,646.50 level. If the market can move above it, look for resistance at the levels I have mentioned.
Earnings do continue this week, but the number of companies reporting is slowing down as we wind down to the end of this season.
Continue to monitor the levels as I mentioned above.
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 jumped 2.04 points Friday to close at 23.23. The high for the day was 24.71.
This was still below the 25 level which has been resistance. For the VIX to head higher, it will have to clear the 25 level.
Short term support should be at 20.31. And I would also expect 18.75 to be support.
28.13 is minor resistance on the upside.
SPX:
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
Minor level: 2,683.10
Minor level: 2,658.70
Major level: 2,646.50 <
Minor level: 2,634.30 ***
Minor level: 2,609.90
Major level: 2,597.70
With a break under 2,646.50, expect that level to offer resistance. 2,675.80 is also a minor resistance level. And if the S & P 500 can close under 2,675.80 today, it would suggest a drop to 2,602.
I am biased ultimately for a move down to 2,500, but we do need two closes under 2,646.50 to confirm that.
Also, 2,700 should be resistance.
QQQ:
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 <
Minor level: 160.94 **
Minor level: 157.81
Major level: 156.25
The QQQ closed at 161.38 on Friday. 165.63 should offer resistance. And 162.50 as well.
Two closes under 160.94 and the QQQ should test 156.25.
Ultimately, I believe the target for the QQQ is to 150.
IWM:
Minor level: 151.56
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75 <
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
Major level: 131.25
The IWM closed at 144.02. It closed down 3.18 on the day.
The key level for the IWM is 143.75. If the IWM has two closes under 143.75, it could drop to 125.
150 should still be resistance.
TLT:
Major level: 121.88
Minor level: 121.49
Minor level: 120.70
Major level: 120.31
Minor level: 119.92
Minor level: 119.14 **
Major level: 118.75
Minor level: 118.36
Minor level: 117.58
Major level: 117.19
Minor level: 116.80
Minor level: 116.02
The TLT closed at 118.41. The TLT is trading right around the 118.75 level. It will need to clear this level to head higher.
Trading as if a rate hike has been cancelled. Buy support.
GLD:
Major level: 121.88
Minor level: 121.10
Minor level: 119.53 **
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
The GLD closed at 118.09. Like the TLT, the GLD will need to clear 118.75 to head higher.
A failure at 118.75 would suggest the GLD should drop.
118.35 is minor resistance and 117.38 is minor support.
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 64.07. A close today under 64.86 and the XLE should test 62.50.
64.06 is minor support. If this can hold, the XLE should bounce. Daily trend is bearish, so a rally would be a bounce in a bear market. And 65.63 should offer resistance.
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 84.80. The FXY closed above the Resistance level at 84.77.
84.57 and 84.77 should offer minor support. Biased for a move up to 85.36.
AAPL:
Minor level: 182.81
Major level: 181.25
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
Apple closed at 169.49. It was down 6.23 on the day.
Biased for a move to 162.50. The question is, will that level hold?
A close today under 171.88 would confirm a drop to 162.50.
WATCH LIST:
Bullish Stocks: REGN, AMT, WDAY, RH, CCI, DLR, RCI
Bearish Stocks: BA, LMT, NOC, FLT, GS, GD, RTN, ASML, NVDA, CXO, UTX, FANG, PLCE, PSX, ABC, CRI, EA, VLO
Be sure to check earnings release dates.
