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.
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Before I begin, I do need to mention that the markets are closed on Monday in celebration of Memorial Day here in the States. This also begins the unofficial start of summer.
We were biased for a drop to the 2,812.50 level and it happened in one day.
The selloff began yesterday before the open. At this open, the market gapped lower 34.03 points. That was from close to close.
The gap under Wednesday's low was 14.41 points.
Because of the gap, the intra day range was only 31.21 points. But, if you measure the range from low to low, it was a move of 45.62 points.
I point this out to show how large the move was.
And our objective of 2,812.50 was hit in one day! Actually, the S & P 500 took out that level, with the low for the day stopping at 2,805.49. So, the low dropped 7 points under the major 1evel.
The low also dropped about 2 points under the minor 2,807.60 level I mentioned yesterday as well.
At this point, the questions is will the 2,812.50 level hold as support?
There are a few things I would like to point out.
The first is that the down to up volume did increase yesterday. On Wednesday, the reading was 2.12 and yesterday, it increased to 3.77.
Not near the selling climax level, I like to see. So, this is not giving us a clear signal.
And for the day, the S & P 500 actually closed at 54% of the daily bar. For a bearish day of that magnitude, the rally to the close moved above the 50% level.
If you scale out and look at the weekly price bar, the most notable factor is that through yesterday, the weekly bar is an inside bar.
So, even with this selloff, the low from last week was not violated. Yesterday's low was 2,805.49 and last week's low was 2,801.43.
The high last week was 2,892.15 and this week's high was 2,868.88.
I bring this up because if the week ends as an inside bar, it would mean that we would expect some volatility and an expansion to follow.
In other words, we could see more days like yesterday.
For today, you do want to see of the low for the week gets retested.
The other key at the moment is that the midpoint of this week's weekly bar is 2,837.
Yesterday's close was 15 points under the projected midpoint so you should watch how the market reacts on a rally to this level.
The key resistance level from yesterday's daily bar is in the 2,821 to 2,829 area.
And the resistance level from last week's weekly is in the 2,846 to 2,850 area.
To help us determine if the 2,812.50 level will hold, we should look at the VIX.
As I mentioned, the 16.41 level is the key level on the upside and the VIX closed at 16.92 or about 50 cents above it. This now implies that if the VIX closes above 16.41 today, it should head higher.
Watch the VIX today to see if it drops back under 16.41.
Pre open, the S & P 500 is trading about 13 points higher. Assuming this trading holds up until the open, it projects an open around 2,835.
Watch to see if the S & P 500 can hold the minor 2,832.03 level.
I mentioned yesterday that I would share some levels on TSLA.
TSLA dropped under the lower band on its daily chart. 208.90 is the lower band on the daily chart and TSLA closed yesterday at 195.49.
So, it is oversold short term and a bounce is likely. If you go long, a conservative entry would be when TSLA closes above 208.90.
The minor level for TSLA is 195.31. And yesterday closed just above it. A close today above 195.31 would suggest that TSLA should move up to 218.75.
A more aggressive long entry is if TSLA can close above 195.31 today. If it does, a buy with a tight stop would be suggested for aggressive traders. Remember though, if TSLA does rally off the 195.31 minor level, you would then monitor to see if it can close above the lower band on the daily chart.
Assuming that TSLA pivots here, I don't see it moving higher than 250.
I would welcome a rally to 250 because I believe it would be cut in half from that level. In other words, it could drop to 125.
I will continue to monitor the levels for you on TSLA as it trades into the future.
Enjoy the holiday weekend!
Here are the Key Levels for the Markets:
$VIX:
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
Minor level: 11.72
As I said above, the VIX closed at 16.92. This would imply that a close today under 16.41 and the VIX should test 18.75.
Watch to see if the VIX holds 16.92 today.
There is minor resistance at 17.19 and minor support at 15.63.
We were looking for a bounce in the VIX because it is oversold in the short term.
SPX:
Major level: 2,968.80
Minor level: 2,949.25
Minor level: 2,910.15
Major level: 2,890.60
Minor level: 2,871.08
Minor level: 2,832.03 **
Major level: 2,812.50 < Hit
Minor level: 2,792.98
Minor level: 2,753.93
Major level: 2,734.40
Minor level: 2,714.88
Minor level: 2,675.83
Major level: 2,656.30
The 2,812.50 target was hit. On the upside, the key level will be 2,832.03. The market should open right around it. Watch to see if it can hold.
On the downside, 2,807.60 should continue to be minor support.
With a projected open around 2,828, there are two levels that that should be closely watched today.
2.836.70 is the high of the down gap bar. Watch to see if the S & P 500 can close above it intra day. If it does, a move up to 2,846 is possible.
QQQ:
Major level: 193.75
Minor level: 192.19
Minor level: 189.06
Major level: 187.50
Minor level: 185.94
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
The QQQ closed at 178.25. The QQQ closed under the minor 179.69 level. So, a close today under this level the QQQ should drop to 175.
176.56 is minor support and 181.25 should now be resistance.
There is technical resistance around 179.
IWM:
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
The IWM closed at 149.39. Closed under the 150 level, but we were looking for a drop to that level.
146.88 is the lower level that I do expect the IWM to break under. If it does, you can expect lower prices.
The IWM is oversold in the short term.
Watch to see if IWM can clear 150.
TLT:
Major level: 128.13
Minor level: 127.74
Minor level: 126.95
Major level: 126.56 <
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44
Minor level: 123.05
The TLT closed out at 127.67. The TLT came within 4 cents of the 128.13 level, which I have mentioned.
Watch to see if the TLT can clear 128.13 today. This is a key level. And if the TLT does clear 128.13, it should head higher. If not, I would expect a selloff.
The TLT is also right up against the upper band on the daily chart, which is 128.32.
GLD:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
Minor level: 124.22
Minor level: 122.66
Major level: 121.88
Minor level: 121.49
Minor level: 120.70
Major level: 120.31< < HIT
Minor level: 119.92
Minor level: 119.14
Major level: 118.75
The GLD closed at 121.17. Watch the minor 120.70 level today. A close today above 120.70 and the GLD should test 121.88.
120.70 should be minor support now. And 121.48 is minor resistance.
The 30 and 60 minute charts have both crossed back into downtrends. This now suggests momentum has shifted to the donwnside.
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 61.39. 61.33 is minor support.
Breaking under 62.50 is very bearish. The XLE will have to drop to 59.38 to shift the trend.
Short term the XLE is oversold and could bounce. Technical resistance is at 64.
AAPL:
Major level: 212.50
Minor level: 209.38
Minor level: 203.13
Major level: 200.00
Minor level: 196.88
Minor level: 190.63
Major level: 187.50
Minor level: 184.38 **
Minor level: 178.13
Major level: 175.00
Apple closed at 179.66. Resistance should now be at the 200 ema and the 253 day average. The 200 ema is 185 and the 253 average is 190.
Also, key resistance is at 187.
WATCH LIST:
Bullish Stocks: SHOP, NOW, FLT, LLL, CTAS, WDAY, APD, MCD, HUBS, GPN, CB, RCL, WP, AXP
Bearish Stocks: TSLA, GS, AAPL, FDX, GD, NVDA, LEA, SPOT, BIDU, EOG, BUD, LOGM, ALB, ALNY, GRUB, SHAK, CLB, OXY
Be sure to check earnings release dates.