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
Total Premium Collected $0.75
DUST Long $4.50
Total Premium Collected $0.70
RRC Long at $11.85
Total Premium Collected $0.70
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
ET Long at $7.50
ET Short March 20th - $8 Call @ $0.60
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As if the markets don't have enough issues to try and make sense of, today is triple witching day. This is a day that usually brings added volatility. I am not sure it can add more to what we have seen, but I thought I would put it out there.
And add this to the fact that today is Friday the 13th. Can anything else go wrong?
But, at extreme fear is when opportunities exist.
To measure fear other than the VIX, which was spiked to a high of over 75, I use the bullish percent index.
The bullish percent index now reads 1.40. To give you an idea of how extreme this reading is, at the generational bottom in 2009, the bull percent index was 1.60.
So, this sentiment indicator is actually less than at the major bottom in 2009.
And as a comparison, at the bottom in December 2018, it read 11.
Back in 2009, it took about a year and one half to drop to 1.6. This drop took only one month. The speed of this drop is what really sets this sell-off apart from other pullbacks.
If I look at various sector bullish percent index readings, I find that they are all oversold.
For example, the Tech Sector reading is a paltry 1.41. The energy sector reading actually hit 0. This shows you how pessimistic everyone is on energy.
The other oversold factor is that the S & P is trading well under the lower band on its daily chart.
The lower band is 2,597 and yesterday's low dropped to 2,478.86 or about 120 points below the lower band.
This tells us that the market should retest the lower band after it closes back inside it.
This drop has taken out all the targets I have mentioned on the way down.
The last key level is 2,500. And yesterday took it out by about 20 points.
The next level under 2,500 is 2,457. This price represents a six-level move off the top.
If this price cannot hold, I would expect a drop to around 2,300.
The other concerning factor is that yesterday, the S & P took out the midband on the weekly chart. The midband is 2,511.43.
With the market trading under the lower band on the daily chart, a bounce would not be out of the question.
And the market would need to close above the midband on the weekly chart.
A firm close under the midband and the market could drop to the lower band on the weekly chart.
So you know, the lower band on the weekly chart is 1,537. If that level is hit, it would be a drop of 1,856 points or 55% off the top.
As a point of reference, the drop into the March 2009 bottom was a loss of 57.6%
I point this out because this has happened before.
Of course, I will continue to monitor all levels as we trade into the future.
I hate to sound like doom and gloom. If the coronavirus can be contained or at least alleviated, I would suspect you could see a bottom and a sharp bounce.
But, with more and more public services closing down in the States, my fear is this will get worse before it gets better.
Pre open, the market is getting a bounce. The S & P is projected to open about 112 points higher. This projects to an open around 2,592, which would be above yesterday's midpoint, which is 2,570.
If the 2,570 level cannot hold on a sell-off, I would expect more selling pressure.
The other level to consider today is 2,659, which is the lower band on the 60 minute chart.
The projected open is still about 70 points below the lower band. If the market can close above the 60 minute lower band, we could see a continued push. If it can't, more selling would be expected.
Finally, there are 2 positions that expire today. And no doubt the calls will expire worthless.
Should you trade the bounce? If you do, I would stick with the QQQ and the handful of stocks that are still in uptrends on their 60 minute charts.
Believe it or not, there are still stocks that are bullish on their 60 minute charts. The shortlist includes REGN, DPZ, DXCM, LII, CLX, TLT, ZM and STMP
The final comment I want to make today is that yesterday, again, was another selling climax. The down to up volume was 14.01.
This now brings the number of selling climaxes to seven in this down move.
This factor, along with the others I mentioned above, suggests we should see a bounce in this market.
ADBE reported last night and is trading about $18.50 higher. And DOCU also reported and is trading about $12.31 higher.
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 75.47, closing 21.57 points higher on the day. This was a spike of 40%.
Perhaps the final blow-off.
The two key levels for today are 74.44 and 61. I would expect the VIX to open below 74.44 and it should be resistance on a move higher.
The VIX is trading well above the upper band on its daily chart, which is 61.
But, clearly the VIX is overbought.
Also, if the VIX drops under 62.50, it should continue lower.
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 <
Minor level: 2,617.25
The S & P closed at 2480.64. This was a massive drop of 9.51%. The S & P dropped 260.74 on the day.
Watch the major 2,500 level today. If the S & P can hold this level, we could see a multi day bounce.
2,659.44 is the lower band on the 60 minute chart. 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:
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
Minor level: 205.47
Minor level: 203.91
Major level: 203.13
Minor level: 202.35
Minor level: 202.35
Major level: 200.00
The QQQ closed at 177.32. The QQQ broke under the midband, which is 195.50. This level should now be resistance.
The lower band on the 60 minute is 187.22 Watch this level today.
174 is a short term technical support level.
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 111.97. The IWM closed 13.91 lower for the day. The largest drop of all markets yesterday. The IWM dropped 11.05%.
Still trading well below the lower band on the daily chart. The lower band is 135.76.
The IWM has now overextended about 24 points below the lower band.
The lower band on the 60 minute chart is 123.35. Watch to see if the IWM can clear this level.
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 157.50. The TLT closed under the upper band on the daily chart, which is 159.79. This level should now be resistance.
Watch the upper band today. The TLT should open higher, so watch if it can clear this level.
171.56 is the upper band on the 60 minute chart and should be resistance.
156 should offer support.
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 147.79. Watch the minor 149.22 level. If the GLD can clear this level, it should move higher. If not, it should head lower.
150 should now be technical resistance.
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 29.47. This market is still in free fall. The XLE closed 4.20 lower yesterday. And is still well below the lower band on the daily chart.
The lower band on its daily chart is now 45.32. I don't think I have seen a market this stretched.
Clearly another market in panic selling mode.
31.98 is the lower band on the 60 minute chart. And the XLE closed under this level as well. The XLE needs to clear 31.98 to see a move higher.
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 248.23. Apple dropped $27.20 or 9.88%.
Apple is still trading above the midband on its daily chart. That level is 234.20 and Apple is still about $14 above it. This should be support, unless it is violated.
Apple is still below the lower band on its 60 minute chart. That level is 256. Watch this level today for possible support, assuming a move above it.
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
