While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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
ASNALong 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
RRC Long at $11.85
Total Premium Collected $.55
RRC Short Feb 15th - $12.00 Call @ $0.25
RIG Long at $8.81
RIG Short Feb 15th - $9 Call @ $0.26
.........................................................................................
Yesterday saw the S & P 500 continue to tick higher after being below the lower band on the daily chart.
For the day, the S & P 500 closed 18.34 points higher. It closed at 2,724.87.
This now puts the S & P 500 within 10 points of the 2,734.40 objective.
And we are sitting right at the midband.
I remember writing way back when the S & P 500 was trading under the lower band that the general rule is that the market will run to the midband after it closes back inside the bands.
And once again, that price objective has not failed.
I know it seemed like a fairy tale when the S & P 500 was trading around 2,350 that a rally up to 2,730 would be out of the question.
But, that is where we are.
At this point, the midband is 2,730.83 and yesterday's high was 2,724.99. So, the S & P is within six points of the midband objective.
We know that either one of two things should occur now.
Either the market fails and head lower to retest the lower band ... or it breaks through and continues higher.
I suspect you could say that the market could consolidate around the midband before the direction is revealed, but that would just be a pause before the move begins in ernest.
The question is can we get a bias as to what the market will do?
I think there are a few things we can look at.
The first is that VIX. Just like the S & P 500, the VIX was trading around the midband. But in the case of the VIX, it was just above the midband as opposed to the S & P 500 which was just under it.
The midband for the VIX is 17.34. And for the past three days, the VIX has traded under the midband.
You would expect the VIX to find support at the midband if the market were to drop.
We can also look at a few of the other major markets.
The DOW has already cleared the midband. The DOW closed yesterday at 25,239.37 and their midband is 24,918.
So, as of yesterday, the DOW was above the midband by about 300 points.
The QQQ did close above its midband yesterday for the first time in two months.
It closed yesterday at 169.53. And its midband is 169.14, so it just cleared the level.
The NASD Composite is similar to the S & P 500 in that it is just below the midband. It closed yesterday at 7,347.54 and the midband is 7,400.12. So, it is about 60 points below the midband.
So, how do we interpret all this information?
First, I think the key at the moment is that the VIX broke under the midband which gives us a bias that the S & P 500 will break through its midband.
I could be wrong, but that is my thinking at the moment.
The other factor to consider at the moment is that the daily bar for the S & P 500 closed at 100% of the bar.
This puts the odds in favor of taking out yesterday's high of 2,724.99, before the low of 2,698.75.
Pre open, the S & P 500 is trading about 5.50 points higher. If the trading holds up until the open, yesterday's high should be taken out at the open.
This would suggest you want to see how the market reacts at 2,730.83 which is the midband. This level should no doubt be tested today.
Support from last week's weekly bar is in the 2,670 to 2,576 area. And support from yesterday's daily is in the 2,712 to 2,715 area.
Here are the Key Levels for the Markets:
$VIX:
Minor level: 22.66
Major level: 21.88
Minor level: 21.10
Minor level: 19.53
Major level: 18.75
Minor level: 17.97
Minor level: 16.41
Major level: 15.63 <
Minor level: 14.85
Minor level: 13.28
Major level: 12.50
The VIX closed at 15.73. Yesterday's low took out the 15.63 level by 30 cents.
If the VIX breaks under 15.63, it should continue down.
The VIX has now retraced the entire upmove it made in December.
A break under 15.63 would pave the way for a move to 12.50.
SPX:
Major level: 2,734.40 <
Minor level: 2,714.88
Minor level: 2,675.83 **
Major level: 2,656.30 <
Minor level: 2,636.75
Minor level: 2,597.65
Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00
Objective is to 2,734.40. This should no doubt be tested today.
As I said, the key at this point is the midband. And this level should be tested today along with the 2,734.40 resistance level.
Short term charts remain bullish. 2,755 could offer technical 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
Minor level: 154.69
The QQQ closed at 169.53 yesterday. This was just above the midband which is 169.14. This level should offer support.
The next minor level is 170.31. Two closes above 170.31 and the QQQ should run up to 175.
168.75 should be support. If the QQQ cannot hold this level, I would expect a retest of the low. If it does hold, look for a move up to 175.
IWM:
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
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
The IWM closed at 150.94. The IWM cleared the 150 objective we were looking for.
The IWM has been the laggard. We know this because this market is the farthest from its midband.
The midband is 155.94 and yesterday's close was about 5 points below it.
But, like the other major markets, short term charts remain bullish.
150 should now be strong support.
TLT:
Major level: 123.44
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
Minor level: 118.14
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
The TLT closed at 120.42. The TLT dropped to the 120.31 level.
At this point, it will need two closes above 120.70 to move higher. And two closes under 119.92 to drop to 118.75.
Minor support is at 119.92. If the TLT drops under this level, I would expect a drop to 118.
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 123.96. This suggests that if the GLD can close under 124.22 today, it should drop to 121.88.
At this point, the GLD is overbought and the odds favor a move lower.
But, short term charts remain bullish, so the GLD should bounce around before it has any meaningful pullback.
XLE:
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
Minor level: 61.72
Minor level: 60.16
Major level: 59.38
The XLE closed at 65.04. The XLE is now within 50 cents of the 65.63 objective.
64.06 should now offer minor support. 67.19 should offer minor resistance.
Short term charts are bullish.
FXY:
Major level: 89.84
Minor level: 89.65
Minor level: 89.26
Major level: 89.06
Minor level: 88.87
Minor level: 88.48 **
Major level: 88.28
Major level: 87.50 <
Major level: 86.72
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
The FXY closed at 86.85, literally sitting right on the midband which is 86.80.
You know the implications if the FXY breaks under the midband.
86.33 should be support. And resistance should now be at 87.30.
AAPL:
Major level: 187.50
Minor level: 184.38
Minor level: 178.13
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: 159.38
Minor level: 153.13
Major level: 150.00
Apple closed yesterday at 171.25. A close today above 170.31 and Apple should test 175.
With short term charts in uptrends, look to go long on a pullback.
At this point, the next pullback would be an opportunity to go long.
162.50 should offer support.
WATCH LIST:
Bullish Stocks: REGN, ULTA, WCG, OST, VRTX, WDAY, ZBRA, AMT, CRM, DECK, ADP, MOH, LLY, DTE, CCI, UAL
Bearish Stocks: ATHM, KMX, QCOM, WTW, URBN, SIG, GES
Be sure to check earnings release dates.