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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Friday saw a round of selling that could indicate that a short term top for the market is in.
The S & P 500 actually gapped higher on Friday by 7.56 points. This actually turned out to be the high for the day, with the market selling off the balance of the day. The high came in at 3,333.18.
The market finally settled the day down 30.07 points. The low for the day came in at 3,281.53.
So, the range for the day was actually 51.65 points. This was over double the daily average true range, which is 22.60 points.
And the day closed out at 27% of the daily bar, which suggests that the low will be violated before the high.
And the pre open certainly suggests that will be the case.
As I write this, the S & P is trading about 45 points lower.
So, the market is getting the pullback that everyone has been looking for. We certainly were due to factors I have written about.
For example, the VIX trading back down to all time lows. Every time the VIX gets down to around the 12.50 level, we need to be cognizant that it should bounce.
And I recently wrote that we should see a spike in the VIX to signal top.
We also have been aware that the S & P was bumping up against the upper band on the daily chart.
The upper band on Friday read 3,345.71. And Friday's high went to 3,333.18 or within 12 points of the upper band.
There was one more factor to consider. The last major swing for the S & P in its daily chart was 299 points.
This last swing measured 268 points. So, from a range standpoint, a pullback would not be usual.
The question now is where could this pullback stop?
The last downswing measured 84 points. Between Friday's downmove and today's projected open, that would suggest that this should be a quick sell off.
The prior sell-off measured 166 points. If this move is replicated, the sell off should stop around 3,170.
Another potential target would be back to the midband on the daily chart. That price level is around 2,956.
This would be almost a 400 point drop off the top.
Could this happen? Anything is possible. But, if the market does test the midband, I don't see it dropping straight down to that level.
Just like upmoves, downmoves have bounces along the way.
And with a projected open around 45 points lower, the market would open under the lower band on the short term 10 minute chart.
The lower band is 3,281 and the projected open should be around 3,250 or about 30 point below it.
This would certainly signal an oversold condition.
But, it also tells us that if the S & P can bounce and move back above the lower band, it will no doubt retest that level again.
If we scope out and look at the formation of the weekly price bar, we see that it made a higher high. And it closed just below the midpoint, which is 3,309.65.
The weekly range was only 56.24 points, which was less than the weekly average true range, which is 61.70.
But it did close at 25% of the weekly price bar. So, we do expect the weekly low to be violated before the high.
The projected open should be the S & P about 31 points below the weekly low.
If the market does bounce, look for resistance at the low, which is 3,281.53 and around the 3,300 level.
This week we do get into the heart of earnings season.
Tomorrow afternoon, we get earnings from Apple. And Wednesday morning we hear from Boeing.
And Wednesday afternoon, we get earnings from a number of tech heavyweights, including FB, MSFT, PYPL and TSLA.
The week closed out with AMZN reporting Thursday afternoon.
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 14.56. The VIX spiked after three days of trading around 12.50.
Friday's high was 15.98 of about 30 cents above the major 15.63 level.
The VIX could bounce to 18.75 with the uptrend still being intact. A move higher would indicate this pullback could be deep.
At this point, the previous resistance level of 13.28 should now be support.
So this should still be resistance until it is violated. And technical resistance is at 16.50.
S & P 500:
Major level: 3,427.40
Minor level: 3,398.35
Minor level: 3,320.25
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
The S & P closed at 3,295.47. The projected open should put the market below the major 3,281.20 level.
Support should be at the minor 3,242.15 level. Watch to see if this level holds. If it can't, the S & P should head lower.
Technical support is around 3,224.
QQQ:
Major level: 225.00
Minor level: 224.22 **
Minor level: 222.69
Major level: 221.91 <
Minor level: 221.13
Minor level: 219.56
Major level: 218.78
Minor level: 218.00
Minor level: 216.43
Major level: 215.65
Minor level: 214.87
Minor level: 213.30
Major level: 212.50
The QQQ closed at 223.81. The QQQ hit the 225 objective and sold off.
It sold to under the minor 224.22 level and back below the upper band.
The upper band is now 223.81 and should now be resistance.
Look for resistance as well, at the major 221.91 level.
Technical support is at 213.
IWM:
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
Minor level: 151.56
Major level: 150.00
The IWM closed at 165.39. At this point, if the IWM closes under 167.19, it should drop to 162.50. 167.19 should be resistance.
The upper band is 169.07 and the IWM closed under it. This level should now be resistance.
165 is a minor support level. A break under this and expect the IWM should continue down and it will be resistance.
TLT:
Major level: 143.75
Minor level: 142.97
Minor level: 141.41 **
Major level: 140.63 Hit
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 142.08. The target of 140.63 was hit. This should be support.
A close today above 141.41 and the TLT should hit 143.75.
The TLT is overbought short term. Watch the 142 area.
GLD:
Major level: 150.00 <
Minor level: 149.22
Minor level: 147.67 **
Major level: 146.89
Minor level: 146.11
Minor level: 144.54
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
The GLD closed at 147.98. With a close today above 147.67, the GLD should test 150.
146.89 should now be minor support. And 147 should be technical support.
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 Hit
Minor level: 55.86
Minor level: 55.08
Major level: 54.69
The XLE closed at 56.62. The XLE did hit the 56.25 level. Watch for a break under this level.
The midband, which is 59, should now be resistance.
The 55 area should be technical support.
AAPL:
Major level: 325.00
Minor level: 321.88
Minor level: 315.63 **
Major level: 312.50
Minor level: 309.38
Minor level: 303.13
Major level: 300.00
Minor level: 296.88
Minor level: 290.63
Major level: 287.50
Minor level: 284.38
Apple closed at 318.31. Apple went to within 2 points of the 325 objective.
Apple is trading about 7 points lower, pre open.
The upper band is now 320.49 and it should be resistance.
309.38 should offer support. And technical support is around 310.
The 315 area should offer technical support.
WATCH LIST:
Bullish Stocks: GOOGL, TSLA, SHOP, LMT, ADBE, MA, FLT, AAPL, COST, LRCX, RNG, ADSK, V, GD, DECK, KLAC, HSY
Bearish Stocks: REGN, BA, ALGN, AAP, FFIV, CVX, XOM, CMA, QURE, FSLR, RAMP, HLF, CLB
