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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The market reacted with mixed emotions after the Fed announcement that they lowered rates.
As you know, the market had been quiet heading into the Fed meeting.
The question was how would the market react?
If you were on John's webinar yesterday, then you heard me lay out what I felt would be the key to focus on to help determine the move.
I felt that the major 15.63 level on the VIX was the key to watch and if it reversed around that level, that should signal that the market would head up.
As it turned out, the VIX took out 15.63 and went to 15.80 before reversing and dropping to a low of 13.95.
So, the VIX took out the 15.63 level by 17 cents before dropping almost 2 points.
How did this affect the market?
At 2:00, the S & P was trading around 3,000.97 and dropped within the next half hour to a low of 2,978.57. This was a drop of about 22 points.
From there, the S & P staged the rally.
It went from 2,978.57 to 3,007.83 before closing at 3,006.73. The intra day range 29.26 points.
This is certainly the largest range we have seen in a week. And it was almost the daily average true range, which is 30.38.
And the day closed out at 96% of the daily bar. This puts the odds of violating yesterday's high before the low at almost 100%.
The support area from yesterday's daily bar is in the 2,993 area.
Once again, the VIX helped to time the market. That is if you know where the support and resistance is.
And speaking of support, the VIX is now once again back down to its long term 12.50 support level. This now alerts us to a potential turn in the market.
And the sentiment indicators are also getting close to being overbought. The percent of stocks above their 200 day moving average which now reads 73.40%.
And the bullish % index reads 67.80%.
As you know, these indicators are not perfect when timing the market, but they do a decent job of letting us know if the market is overextended.
Here are the Key Levels for the Markets:
$VIX:
Major level: 25.00
Minor level: 24.22
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 13.95 yesterday. The VIX should drop to 12.50. That is still the objective.
The minor 14.85 level should be resistance. And minor resistance is at 14.45.
Support should be at 13.28. A break under 13.28 and the VIX should continue to the 12.50 target.
SPX:
Minor level: 3,164.08
Major level: 3,125.00 <
Minor level: 3,085.95
Minor level: 3,007.85 **
Major level: 2,968.80 <
Minor level: 2,929.73
Minor level: 2,851.58
Major level: 2,812.50
Minor level: 2,773.45
Minor level: 2,695.35
Major level: 2,656.30
The S & P closed at 3,006.73, or about 1 point under the 3,007.85 level. Watch to see if the S & P can clear this level today.
Minor support is at 3,002.90. And at 3,004.20.
Short term trends remain bullish. Look for technical support around 2,997.
QQQ:
Major level: 196.88
Minor level: 196.10
Minor level: 194.53
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
The QQQ closed at 192.52. The QQQ did drop under the 192.19 level, but managed to recoup it.
191.41 is minor support as well as 192.19.
Technical support should be around 191.70.
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 156.52. The IWM will still need two closes above 157.81 to test 162.50.
It dropped under the 156.25 level, but managed to recoup it.
159.38 is a minor resistance level. If the IWM clears this level, look for a move higher. Watch this level today.
156.25 should be support.
TLT:
Major level: 143.75
Minor level: 142.97
Minor level: 141.41
Major level: 140.63
Minor level: 139.85
Minor level: 138.28 **
Major level: 137.50 <
Minor level: 135.84
Minor level: 132.81
Major level: 131.25
The TLT closed at 139.62. The TLT should test 140.63. And it did hit the objective yesterday. The high for the day was 140.66.
140.63 should be resistance. A break under 139.06 and the TLT should head lower. A break above 140.63 and it should head up.
Technical resistance is around 142.
GLD:
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75 <
Minor level: 142.97
Minor level: 141.41 **
Major level: 140.63
Minor level: 139.85
Minor level: 138.28
Major level: 137.50
Minor level: 136.72
Minor level: 135.16
The GLD closed at 140.71. Watch to see if the GLD drops under 140.63. If it does, it should head lower.
139.06 is a minor support level. Watch this level today.
XLE:
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 61.95. The 61.72 level is a minor support level. It will need two closes under this level to head lower.
Two closes above 63.28 and the XLE should test 65.63. And on the downside, the key level is 61.72.
60.94 is a minor support level. And technical support is around 59.
AAPL:
Major level: 225.00 <
Minor level: 221.88
Minor level: 215.63 **
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
Apple closed at 222.77. The target is to 225. And minor support is at 221.88.
218.75 should be a short term support level.
219 is still technical support. And that is where yesterday's low stopped.
WATCH LIST:
Bullish Stocks: LMT, GOOGL, MLM, ASML, LRCX, HD, AAPL, BABA, RH, DE, CMI, ITW, UTX, ZBH
Bearish Stocks: REGN, HUM, SQ, GDOT
Be sure to check earnings release dates.
