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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This is the first update of the new decade. And 2019 closed out with another strong bullish price move.
Tuesday, the market managed to bounce back from the Monday sell-off and closed 9.49 points higher.
The day and year closed out at 3,230.78.
When you think that the S & P 500 opened at 2,476.96, it seems even more remarkable. The S & P moved up 723.93 points for the full year of 2019.
This was a gain of 29.2% for the year. And what is even more remarkable is that the range of 723.93 was 446% of the monthly average true range, which is 162.45 points.
Another impressive factor is the fact that every time the S & P dropped under the upper band on its monthly chart, it was able to recoup it.
And now the year has closed out above the upper band on the monthly chart.
The upper band is now 3,052.12. The year-end close was about 180 points above the upper band.
This is a key level and I would expect a close under the upper band as a minimum for the market to shift to a bear market.
The midpoint of the monthly chart should offer strong support. That level is 2,890. So, if the market sold off and dropped to the midpoint of the annual price bar, it would be a drop of 341 points or 11%.
This would seem like a bear market move, but quite frankly it would be a normal pullback considering the prior range.
And if the market did pullback that far, it would be a drop to around the midband on the daily chart, which is 2,911.
I bring up the midband because the market followed the exact price action you would expect within the extreme bollinger bands.
Let me explain.
The year started out with the price of the S & P sitting right at the lower extreme bollinger band.
After moving up off the lower band, the objective was back to the midband. And in February, the S & P took the midband and moved above it.
Then in June it tested the midband from above and it managed to hold.
After moving above the midband, the S & P tested it again in August and the market continued higher.
And now the market is almost at the upper band, which is 3,303.88. In fact, Tuesday's close was about 100 points under it.
Based on how the bands have worked, I would expect a test of the upper band.
At that point, the key will be if the S & P can clear the upper band.
Can the market repeat the price action of 2019 in 2020?
Quite frankly, I doubt it.
A 29% move would project to a close at 4,175. This would put the market about 900 points above the upper band. I would think this is not sustainable.
Of course, I will continue to monitor these factors as the market trades in the future.
The support area from Tuesday's daily bar is in the 3,221 to 3,223 area.
The support area from last week's weekly price bar is in the 3,233 to 3,234 area, which is right around the daily support area. Watch this area on the upside.
Pre open, the S & P is trading about 19 points higher.
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 **
Minor level: 10.16
Major level: 9.38
The VIX closed Friday at 13.78. At this point, watch to see if 13.28 can hold as support.
And there is technical right around 13.28 as well. If this level cannot hold, I would expet the VIX to head lower.
The VIX could move up to 18.75 with the uptrend still intact.
14.06 should be resistance now.
SPX:
Major level: 3,281.20 <
Minor level: 3,242.15 **
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
The S & P closed at 3,230.78. With a close under 3,242.15, look for a move down to 3,125. The S & P should open above the 3,242 level. If it can hold this level, expect the market to head higher.
Watch the 3,262 area on the upside.
Major support should come in at 3,125. And watch the 3,203 level. It should offer minor support.
Technical support is around 3,228.
QQQ:
Major level: 215.65
Minor level: 214.87
Minor level: 213.30 **
Major level: 212.50 <<
Minor level: 211.74 **
Minor level: 210.17
Major level: 209.39
Minor level: 208.61
Minor level: 207.04
Major level: 206.25
Minor level: 205.48
Minor level: 203.91
Major level: 203.13
The QQQ closed at 212.61. Watch the 211.74 level. The QQQ needs to close above this level to head higher.
212.50 should now be support.
The 211 should offer technical support.
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
Minor level: 145.31
Major level: 143.75
The IWM closed at 165.67. At this point, 167.19 should be resistance. And if the IWM closes under this level today, a drop to 162 should be the objective.
The minor 164.06 level should offer support. If the IWM cannot clear 167.19, it should continue down.
165 should be technical support.
Short term charts still remain bullish.
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 HIT
Minor level: 135.84
Minor level: 132.81
Major level: 131.25
The TLT closed at 135.48. A close today under 135.84 and the TLT should drop to 131.25.
Watch to see if the TLT can clear the 135.84 level. If it can't, it should continue lower.
137.50 should be resistance. And technical resistance is at 136.
GLD:
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
Major level: 134.38
The GLD closed at 142.90. The objective for the GLD should be up to 143.75.
Watch the 142.09 level. If the GLD cannot clear it, the GLD should head lower.
140.63 should be support.
137.50 should be strong support. So if the GLD does break under it, I would expect it to head lower.
The key level is 134.38 on the downside. If the GLD has two closes under this level, it could drop to 125.
Techical resistance is around 140. Short term, the GLD is overbought.
XLE:
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
Minor level: 55.86
Minor level: 55.08
Major level: 54.69
The XLE closed at 60.04. At this point, the XLE would have to regain 61.72. If it can't, a drop to 59.38 would be expected.
With the XLE above the midband which is now 58.84, this level should be support.
The XLE has still not crossed into an uptrend on the daily chart, but it is inching closer. If the XLE can cross into an uptrend and start to move above the midband, it could have a strong move higher.
AAPL:
Major level: 300.00 <
Minor level: 296.88
Minor level: 290.63 **
Major level: 287.50 HIT
Minor level: 284.38
Minor level: 278.13
Major level: 275.00
Minor level: 271.88
Minor level: 265.63
Major level: 262.50
Apple closed at 293.65. A close above 290.63 today and Apple should head up to 300.
287.50 should offer support. And minor support is at 290.63.
And Apple is up against the upper band on the daily chart. That level is 297.49.
Needless to say that short term trends remain bullish.
WATCH LIST:
Bullish Stocks: TSLA, GOOGL, SHOP< HUM, NOC, ADBE, SPY, DPZ, BDX, INTU, NVDA, BABA, FB, MCD, KLAC, URI, ZBH, JPM, IBM, RCL
Bearish Stocks: BA, FFIV, CHKP, ALXN, SAGE, SQ, PLCE, TXRH, CAKE
Be sure to check earnings release dates.
