While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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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Volatility reigned supreme yesterday. The S & P 500 gapped up at the open and ran to a high of 2,653.55, only to sell off at 2:00 EST and drop to close at 2,613.16.
The range for the day was only 42.76 points. I say only because the average true range now reads 50.64 points and for the day, the S & P 500 formed an inside bar.
This tells us to expect an expansion. We had been expecting a pullback after the strong open because of the fact that both the 30 minute and 60 minute charts are still in downtrends.
The question for the day was where should resistance come in?
I laid out a few price levels that I felt could offer resistance and quite frankly, the market never got as high as some of the upper levels. It got to about three points under the major 2,656.30 resistance level, before the sell off.
I also mentioned that Friday was the third selling climax in this downswing.
The issue now is this enough to turn the market? Or what conditions should be met for the third climax to be enough to turn the market?
First off, if the market is going to retest the highs, I would not expect the low from Friday to be violated. That price was 2,586.27.
And the second condition would be that the S & P 500 reclaim the 2,656.30 level.
Pre open, the S & P 500 is trading about 30 points to the upside.
If the pre open gains hold into the open, this would put the open around 2,643. Watch to see if the S & P 500 can clear yesterday's high, which was 2,653.55.
If it can, the next level will be 2,656.88, which was Friday's high and very close to the major resistance level. A close above Friday's high today should indicate that Friday's low will hold as a pivot.
Also, support from yesterday's daily bar should be in the 2,632 area.
Continue to monitor the longer term levels for the market.
Here are the Key Levels for the Markets:
$VIX:
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00
Minor level: 23.44 **
Minor level: 20.31
Major level: 18.75 <
Minor level: 17.19
Minor level: 14.06
Major level: 12.50
Minor level: 10.94
The VIX closed at 21.92 yesterday. It closed .43 points to the upside. But, I do need to mention that BOTH the S & P 500 and the VIX closed to the upside. You no doubt recognize this as a divergence.
The VIX is trading between the major 25 and 18.75 levels. 21.88 should be resistance. Watch the minor 21.09 level today. A break under it and the VIX should continue lower.
$SPX:
Major level: 2,734.40
Minor level: 2,714.88
Minor level: 2,675.83
Major level: 2,656.30 **
Minor level: 2,636.75 <
Minor level: 2,597.65
Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00
Look for support at the minor 2,602.50 level. And 2,627 should offer support as well. 2,640 is a minor support level that should be tested today.
A major price level on a higher timeframe is 2,617.25. Continue to watch this level.
QQQ:
Minor level: 165.63
Major level: 162.50
Minor level: 159.38 **
Minor level: 153.13
Major level: 150.00 <
Minor level: 146.88
Minor level: 140.63
Major level: 137.50
The QQQ closed at 157.73. I am biased for a move down to 150, but 156.25 should offer support and a retest of 162.50 could happen before a test of 150.
If the QQQ can clear 157.81, look for it to offer support.
IWM:
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 IWM closed at 150.54. 150 should continue be a support level. A break under this level and the IWM should head lower.
To move lower, the IWM will need two closes under 149.22. Also, a major level is 146.88. If the IWM has two closes under 146.88, it could drop to 137.
150.78 is a minor level. If the IWM can clear this level, look for it to move higher.
TLT:
Major level: 123.44
Minor level: 123.05
Minor level: 122.27
Major level: 121.88 **
Minor level: 121.49
Minor level: 120.70 <
Major level: 120.31
Minor level: 119.92
Minor level: 119.14
Major level: 118.75
Minor level: 118.36
The TLT closed at 121.30. The TLT closed within 58 cents of the 121.88 level.
With an anticipated open just under the 120.70 level, look for resistance at 121.49.
GLD:
Major level: 131.25
Minor level: 130.47
Minor level: 128.91
Major level: 128.13
Minor level: 127.35
Minor level: 125.78 **
Major level: 125.00 <
Minor level: 124.22
Minor level: 122.66
Major level: 121.87
The GLD closed at 126.82. Looking for a retest of 125. Minor resistance is at 126.56. If the GLD cannot clear this level, I expect a test of 125.
125 should continue to be support. Watch this level. A break under 125 and the GLD should head lower.
And minor resistance is at 127.34.
XLE:
Minor level: 76.95
Major level: 76.56
Minor level: 76.17
Minor level: 75.39
Major level: 75.00
Minor level: 74.22
Minor level: 72.66
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
Major level: 68.75 <
Minor level: 67.97
Minor level: 66.41 **
Major level: 65.63
The XLE closed at 67.67. Pre open, the XLE is set up open right at the 68.75 level.
If the XLE can clear 68.75, it should offer support.
The anticipated open would put the XLE above the 200 ema on the daily chart. The 200 ema is 67.97 and should offer support with a move above it.
FXY:
Major level: 92.19
Minor level: 92.00
Minor level: 91.61
Major level: 91.41
Minor level: 91.22
Minor level: 90.83
Major level: 89.06 **
Minor level: 88.87
Minor level: 88.48
Major level: 88.28
Minor level: 88.09
The FXY closed at 89.83, one cent under the minor 89.84 level. If the FXY can clear 89.84, look for it to continue higher.
Minor support is at 89.65.
AAPL:
Minor level: 178.91
Major level: 178.13
Minor level: 177.35
Minor level: 175.78
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
Apple closed at 170.05. Apple is set to open above 172.50. Based on this, look for support at 171.88.
If 171.88 can hold, look for a move up to 175.
WATCH LIST:
Bullish Stocks: HUM, MCD, PVH, BURL, RL, KSU, CLB, PSX, VLO, LULU, YUM, KORS, LEN, COP, CLR, APC, HFC, MTH
Bearish Stocks: AVGO, ADS, WHR, CB, ALXN, DGX, WST, MDT, TAP, WBA, CERN, LUV, CTRP. ALKS, CRUS, BEN
Be sure to check earnings release dates.