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
TEVA Long at $15.30
TEVA Short Jan 4th-$15.50 Call @ $0.45
DIS Long Jan 25th $107 Call @ $3.35
DIS Long Jan 25th $107 Put @ $3.10
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After closing above the lower band for two days, the market managed to have a huge selloff and closed back under the lower band.
Of course, the market move was exacerbated by the negative announcement coming from Apple about the China slowdown.
But, the recent market moves typifies how a market or a stock can trade when it is under the lower band, or around the lower band.
Remember, these extreme band settings should contain 99.9% of all price action. So, trading under, or above the upper band is a significant event.
And now that we are back under the lower band, it shows once again how oversold this market is.
Volatility is usually extreme at these levels. And that is certainly what we are seeing.
Yesterday also was a prime example of support becoming resistance.
The resistance level from Wednesday's price bar was around 2,493. With the bearish gap open below this level, it was a level to watch as potential resistance.
As it turned out, the high for the day yesterday was 2,493.14, right at the support level from Wednesday.
The market essentially headed straight down from the open until it was oversold on the shorter term charts.
If you could not catch a short right off the open, the market gave you a chance at around 12:00 when it bounced to a high of 2,488.
The question now is what to expect today.
Let's begin with the fact that the S & P 500 closed at 8% of the range of the bar. This puts the odds of violating yesterday's low before the high at around 92%.
And the resistance level from yesterday's daily bar is in the 2,468 to 2,470 area.
Pre open, the S & P 500 is trading about 29 points higher which projects to an open above the resistance level.
So, you certainly want to watch the 2,468 to 2,470 area on a pullback to see if it can hold as support.
The other key price level to monitor will be the lower band which is now 2,479.76.
If the S & P 500 can reclaim this level, a long may be worth the risk with a tight stop just under the lower band.
I do want to mention that the pre market trading is BEFORE the NonFarm Payroll report, which is due at 8:30 EST. I am writing this update before that time but, as you know, this report has the ability to massively move the markets.
In closing, I want to point out that the weekly price bar is shaping up as an inside bar. The high for the week, so far, is 2,519 and the low is 2,444.
With a projected open around 2,477, watch to see if the S & P 500 can take out the 2,519, assuming the market keeps rallying.
In closing, I do want to mention that we have one open position that expires today. That is the short $14.50 call on TEVA. TEVA closed yesterday about $1 above the strike.
Leave the position alone and if TEVA settles above $15.50, the calls will be assigned and you will sell your shares at $15.50.
Continue to monitor the levels as I mentioned above.
Here are the Key Levels for the Markets:
$VIX:
Major level: 43.75
Minor level: 40.63
Minor level: 34.38
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
The VIX closed at 25.19 for the day. It was up 1.97 on the day. The VIX did not break above the upper band on the daily chart. That level is 29.85 and should act as resistance.
Watch the 21.88 minor support level. If the VIX breaks under it, look for it to head lower.
SPX:
Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00 <
Minor level: 2,484.38 **
Minor level: 2,453.13
Major level: 2,437.50
Minor level: 2,421.88
Minor level: 2,390.63
Major level: 2,375.00
After closing above 2,500, the S & P dropped to close at 2,447.89. This would suggest that if the market closes under 2,484.38 today, it would drop to 2,437.50.
The projected open should be about 7 points below the minor 2,484.38 level.
Watch to see if the market can clear this level. If it can, it should be support. If not, it will be resistance.
QQQ:
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
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 QQQ closed at 149.82. To move lower, the QQQ will need two closes under 148.44.
Watch the 150 level today. The QQQ should open above it and it would then be support on a pullback.
IWM:
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 <
Minor level: 129.69 **
Minor level: 126.56
Major level: 125.00
The IWM closed at 132.25. It closed just under the lower band which is now 132.64.
Watch this level today. Also, minor support should be at 131.25.
TLT:
Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44 Hit
Minor level: 123.05
Minor level: 122.27 **
Major level: 121.88 <
Minor level: 121.49
Minor level: 120.70
Major level: 120.31
Minor level: 119.92
The TLT closed at 123.54, up 1.39 on the day. The TLT did take out the major 123.44 level.
The daily chart continues to inch closer to an uptrend. It is now within 7 cents of crossing into an uptrend.
121.88 should be support.
Next major level on the upside is 125.
GLD:
Major level: 125.00
Minor level: 124.22
Minor level: 122.66 **
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
The GLD closed at 122.43. The GLD took out the 121.88 level.
The next level to the upside will be 122.66. Two closes above 122.66 and the GLD should test 125.
Minor resistance is still at 123.44.
121.09 should be minor support.
XLE:
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
Minor level: 61.72
Minor level: 60.16
Major level: 59.38
Minor level: 58.60
Minor level: 57.03 **
Major level: 56.25
The XLE closed at 57.90. Like most markets, the XLE is trading around the lower band.
The lower band is 57.60. Watch to see if the lower band can hold.
57.03 should be minor support. And 60.94 is 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 close at 88.82. It was up 1.17 on the day. It is moving up from the midband which is 86.72.
89.84 is minor resistance. I don't expect the FXY to clear this level. But if it does, look for the FXY to continue higher.
Like the TLT, our resistance levels have been almost perfect on the FXY. And like the TLT, I do expect a large pullback once these markets stall out.
AAPL:
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: 159.38
Minor level: 153.13
Major level: 150.00
Minor level: 146.88 **
Minor level: 140.63
Major level: 137.50
Apple had a massive drop of almost 10% yesterday based on the pre-announcement.
For the day, it was down $15.73, to close at 142.19.
This now suggests that if Apple closes under 146.88 today, look for a move down to 137.50.
The lower band is now 133.30. Quite frankly, I would not have thought that Apple would have made a move from the upper band to the lower band but it is only $9 away from it.
Wait for Apple to settle out before attempting a long. The logical area will be the lower band.
WATCH LIST:
Bullish Stocks: BGS, RCII, LSCC
Bearish Stocks: RTN, JAZZ, UTX, RACE, JACK, GILD, BG, CCL, KHC, PRGO, BCE, GIS, MD, TUP, ANDX, AL, JCI, CAG
Be sure to check earnings release dates.
