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
ASNA Long at $14.20
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DUST Long $4.50
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RRC Long at $11.85
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RRC Long at $9.20
RIG Long at $8.81
Premium Collected - $1.45
FEYE Long at $17.18
Total Premium Collected $1.06
ET Long at $11.78
ET Short March 13th - $12 call @ $0.35
DBX Long at $19.70
DBX Short March 13th - $20 call @ $0.50
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The sell-off peaked yesterday with an incredible day where the S & P 500 closed 225.81 points to the downside.
The market closed at 2,746.56 and it gapped down 108.48.
The gap open alone was greater than the daily average true range, which is 93.14.
This open triggered trading halts. And there were a few more during the day.
These crash type moves have a habit of overloading the systems. For example, I could not get charts from stockcharts.com for about 3 hours yesterday.
And a trading friend of mine told me he could not log into his online account all day! This has a habit of elevating your anxiety level, especially if you are trying to close positions.
But, the worse aspect of a day like this is if you use stop losses. This is because a stop loss is triggered on the first uptick. And with a massive bear gap, your fill will be certainly a lot less than you expect.
If you use stop losses and traded in a market like yesterday you no doubt know what I mean.
So, after a massive sell-off like we had yesterday, what do we expect?
Resistance for the S & P based on yesterday's daily bar should be in the 2,800 to 2,805 area.
Yesterday's low dropped to 2,734.43. This is still about 130 points above the lower band on the daily chart. I do believe we see a test of the lower band. The lower band is actually 2,604.28.
But here is where my analysis gets interesting.
The major levels I track are 156 points for each level. A five level move is 780 points.
If I subtract that from the high, which was 3,393.52, the projected bottom would come in at 2,613.52.
This price is within 10 points of the lower band.
The DOW is already trading at its lower band on the daily chart. Actually, it is trading under it. The lower band is 24,058.79 and yesterday's low was 23,706.07.
This tells us that the lower band should be retested after the DOW moves back inside the lower band.
The QQQ did close under the midband on its daily chart yesterday, which is what we expected.
The midband is 195.27 and the QQQ closed at 193.57. The lower band is 155.50, so the QQQ is still well above the lower band.
This relationship suggests that the NASD market is still the strongest of the major markets and should get the strongest bounce when the market does finally bottom.
Pre open, the S & P is trading about 95 points higher. This projects to an open around 2,841. This is above the resistance levels of around 2,800. These levels would then be support on a sell off.
If the market continues to move higher after the open, watch yesterday's high of 2,863.89. If the market cannot clear this level, then I would expect a pullback.
A few other comments about yesterday. The first is that there was a massive selling climax yesterday.
The down to up volume was 17.08. This was now the fifth selling climax in this downmove. This does suggest that the selling could be coming to an end.
The other comment is that the bullish percent index now reads 12.40.
This is now at an oversold level. The percent of stocks under their 200 day moving average are also at an oversold level. This sentiment indicator reads 17.23.
Both these indicators have run from their overbought levels to oversold levels, in about two months.
ADBE reports Thursday after the close and DOCU also reports the same day.
Here are the Key Levels for the Markets:
$VIX:
Major level: 40.62
Minor level: 39.84 **
Minor level: 38.28
Major level: 37.50
Minor level: 36.72
Minor level: 35.16
Major level: 34.38
Minor level: 33.60
Minor level: 32.03
Major level: 31.25
Minor level: 30.48
Minor level: 28.91
The VIX closed at 54.46, closing 12.52 points higher on the day. The VIX closed above the major 53.13 level. The next minor level is 53.91, so if the VIX closes above this level today, it should move up to 56.25.
The VIX is trading well above the upper band on its daily chart, which is 29.17.
It is also trading well above the upper band on its 60 minute chart, This level is 47.96. For a meaningful bounce in the markets, the VIX will need to trade under this level.
But, clearly the VIX is overbought.
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: 2,929.75
Minor level: 2,851.65
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 2,746.56. Yesterday closed below the minor 2,773.45 level.
This now suggests that if the S & P closed under this level today, it should drop to 2,656.
But, the S & P projects to open about 2,841. This would suggest that 2,773 should be support on a pullback.
And watch the minor 2,851.65 level on the upside.
2,870 is the lower band on the 60 minute chart and is projected to open under it, even with this strong push. Watch to see if the S & P can clear the lower band. If it can't, expect more selling.
The violation of the lower band tells us that selling is not over.
QQQ:
Major level: 221.85
Minor level: 221.07
Minor level: 219.50
Major level: 218.75
Minor level: 217.97
Minor level: 216.43
Major level: 215.65
Minor level: 214.87
Minor level: 213.30
Major level: 212.50
Minor level: 211.72 **
Minor level: 210.16
Major level: 209.38 <
Minor level: 208.60
Minor level: 207.03
Major level: 206.25
The QQQ closed at 193.57. The 193.50 area is a key level to watch today. The QQQ should open above it and I would expect suppot at this level on a sell off.
With the QQQ now trading under the midband, which is 195.27, watch this level for support or resistance.
The lower band on the 60 minute us 198. The QQQ should open above it. And I would expect support at the lower band on a sell-off.
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 <
Minor level: 148.44 **
Minor level: 145.31
Major level: 143.75
The IWM closed at 130.36. The IWM closed 9.72% lower on the day. The largest drop of all these markets, except for oil.
The lower band on the daily chart is 138.33 and the IWM closed well below it. Clearly an oversold market.
But, this does tell to expect a test of the lower band.
TLT:
Major level: 159.38
Minor level: 158.60
Minor level: 157.03
Major level: 156.25
Minor level: 155.48
Minor level: 153.91
Major level: 153.13
Minor level: 152.35
Minor level: 150.78
Major level: 150.00
Minor level: 149.22
Minor level: 147.66
Major level: 146.88
The TLT closed at 171.29. The TLT moved well above the upper band on its daily chart. The upper band is 158.79. Panic buying put the TLT well above this level.
It is also above its upper band on the 60 minute chart. That price level is 167.38. Watch to see if the TLT can close under this level. If it can, I would expect a move to the 158 area.
GLD:
Major level: 159.38
Minor level: 158.60
Minor level: 157.03 **
Major level: 156.25
Minor level: 155.47
Minor level: 153.91
Major level: 153.13
Minor level: 152.35
Minor level: 150.78
Major level: 150.00
Minor level: 149.22
Minor level: 147.67
Major level: 146.89
Minor level: 146.11
The GLD closed at 157.81. Watch the minor 158.60 level. If this holds as resistance, look for a drop to 156.
159.61 is the upper band on the 60 minute chart. This should be resistance. But, if the GLD takes it out, it should be support.
152 should be technical support.
XLE:
Major level: 56.25
Minor level: 55.47
Minor level: 53.90
Major level: 53.12
Minor level: 52.34
Minor level: 50.78
Major level: 50.00
Minor level: 49.22
Minor level: 47.65
Major level: 46.88
Minor level: 46.09 **
Minor level: 44.53
Major level: 43.75 <
The XLE closed at 33.94. This market is in free fall. The XLE dropped 8.56 or 20.14% yesterday.
This puts the XLE well below the lower band on its daily chart, which is 47.81. I don't think I have seen a makret this stretched.
Clearly another market in panic selling mode.
38.96 is the lower band on the 60 minute chart. And the market should open under this level as well.
These two measurements demonstrate how oversold the XLE is.
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
Minor level: 278.13
Major level: 275.00
Minor level: 271.88
Apple closed at 266.17. Apple dropped $22.86 or 7.91%.
But, Apple still shows strength by virtue of the fact that it is trading well above the midband on the its daily chart. That level is 233.08 and Apple is still about $33 above it.
Should be a stock that moves if we get a bottom.
Having said that, Apple still moves below the lower band on its 60 minute chart. That level is 269. Watch this level today for support.
WATCH LIST:
Bullish Stocks: REGN, DXCM, CME, CLX, GLD, TLT, LSI, TREX
Bearish Stocks: BA, PANW, WEX, WDAY, CBRL, FDX, IT, VMW, MLNX, TWLO, CHKP, GWPH, ALXN, DLTR, WING, DIN, ATHM, ZEN, BLUE
