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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Yesterday, the S & P 500 had its second close above 2,910.15. For the day, the market closed at 2,927.25, down 6.43 points on the day.
This does suggest the objective is now to the major 2,968.80 level.
I went to look at the figures from the top back in October last year. That seems like an eternity ago. But, really that top was only 6 months ago.
Anyway, here is what I found.
At that time, the S & P 500 did confirm a move up to the major 2,968.80 level before failing and dropping to the major bottom back in December.
The only difference between that top and now is that the run back in September and October last year was the first attempt to break through 2,968.80.
The 2,968.80 level is a level that I would expect strong resistance at on the first attempt.
And at that time, it certainly was.
This is now the second attempt to take out 2,968.80, so I would give this objective a little time to see if it can clear the level.
If it can't, a pullback should happen. If it does clear the level, I would expect higher prices.
And if the market does pullback, I would expect another run at the major 2,812.50 level. In fact, I recall saying the same thing last year. And the market did come back to take out 2,812.50.
But right now, the issues are twofold.
The first is whether we can clear the 2,968.80 level. And the second is if we cannot clear the level and pullback, how far does it go?
When we failed last September, the S & P 500 dropped 8 major levels.
So, right now we need to be mindful of the scenarios.
There are two clues to look at to help us determine which scenario may unfold.
The first is the bullish crossover on the daily chart. As I mentioned on yesterday's webinar, the S & P 500 is very close to crossing to the upside on the daily chart.
In fact, the 200 EMA is now within 6 points of the 253-day average. This crossover should occur relatively soon, if it does.
If it crosses to the upside, that should tell us that any selloff will most likely be shallow. And you want to target the end of that correction to go long.
The second thing to look at is the VIX.
The market topped out on September 21 at 2,940.91. After that, the VIX was relatively quiet and did not experience a serious bounce until after the double top.
On October 3rd, the S & P 500 had a double top with the market hitting a high of 2,939.86 or about 1 point under the all-time high. So, there were 8 days between the two tops.
After the October 3rd top, the VIX jumped 22.48% the very next day. And 5 days later, the VIX jumped 43.95% in one day.
The VIX move yesterday was only 6.11%. Not quite the move at the last top.
But if history is to give us clues as to what the market will do, we can look at how the VIX reacts to help determine which scenario is the most likely one.
And at this point, we have not seen a big spike in the VIX.
The resistance level from yesterdays daily price bar is in the 2,931 area.
Facebook is trading about 9% higher after reporting last night. And Microsoft is up almost 5% off their earnings.
And MMM is down about 9% pre open which is dragging the DOW down.
But pre open, the S & P 500 is up slightly.
Here are the Key Levels for the Markets:
$VIX:
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 out yesterday at 13.03. The VIX got only as high as 13.23 yesterday.
So it was just under the 13.28 level, I have said it should be resistance. For a move higher, I would expect a jump over 13.28.
As long as the VIX stays under 12.50, the market should continue to push higher.
As I have said before, we would need a move up in the VIX to signal a turn in the market.
12.89 is a minor level on the downside. If the VIX breaks under this level, it should continue lower.
SPX:
Major level: 2,968.80
Minor level: 2,849.25
Minor level: 2,910.15 **
Major level: 2,890.60
Minor level: 2,871.08
Minor level: 2,832.03
Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
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
Yesterday was now the second close above 2,910.15 which suggests that the upside objective is to 2,968.80.
Minor support should be at 2,924.80 and at 2,921.10.
The 2,913 area should provide technical support.
Continue to buy against support.
QQQ:
Major level: 193.75
Minor level: 192.19
Minor level: 189.06 **
Major level: 187.50
Minor level: 185.94
Minor level: 182.81
Major level: 181.25
Minor level: 179.69
Minor level: 176.56
Major level: 175.00
Minor level: 173.44
Minor level: 170.31
Major level: 168.75
Minor level: 167.19
The QQQ closed out yesterday at 189.71. The next objective for the QQQ should be to 193.75.
189.06 should be short term support. And 189.84 is minor support as well.
Like the S & P 500, both short term charts are bullish. And like the S & P 500, the QQQ is very close to crossing into an uptrend on its daily chart.
Continue to buy against 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 < HIT!
Minor level: 154.69 **
Minor level: 151.56
Major level: 150.00
Minor level: 148.44
The IWM closed at 158.06. Yesterday was the first close above 157.81. A close today above 157.81 and the IWM should test 162.50.
Support should now be at the midband which is 156.27.
Minor support is at 157.03. If the IWM opens above 157.81, look for support at that level.
Both short term charts are bullish. And technical support is around 156.60.
TLT:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00 <
Minor level: 124.61 **
Minor level: 123.83
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
The TLT closed at 123.57. We had been looking for a bounce to 125 and the TLT is complying with us.
123.24 is minor support. Watch to see if the TLT can clear 123.93. If it can, it should move higher.
GLD:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
Minor level: 124.22
Minor level: 122.66
Major level: 121.88
Minor level: 121.09 **
Major level: 120.31<
Minor level: 119.92
Minor level: 119.14
Major level: 118.75 <
The GLD closed at 120.47. If the GLD can hold 120.31, I would expect a bounce.
A break under 119.53 and the GLD should head lower.
And I would expect resistance at 121.88.
Both the 30 minute and 60 minute charts remain bearish.
Technical resistance is still around 121.70.
XLE:
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
Major level: 68.75 < HIT!
Minor level: 67.97 **
Minor level: 66.41
Major level: 65.63
Minor level: 64.85
Minor level: 63.28
Major level: 62.50
Minor level: 61.72
Minor level: 60.16
Major level: 59.38
The XLE closed at 67.30. This now suggests that if the XLE closes under 67.97 today, it should drop to 65.63.
The XLE sold off the midband on the daily chart. That level is 68.77.
Short term charts remain bullish. Technical support is at 67.20. If the XLE breaks under this support, it should drop to 65.
I would expect strong support at the 65.63 level.
FXY:
Major level: 89.84
Minor level: 89.65
Minor level: 89.26
Major level: 89.06
Minor level: 88.87
Minor level: 88.48
Major level: 88.28
Major level: 87.50
Major level: 86.72
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16 <
Minor level: 84.97
The FXY closed at 84.95. Looking for a bounce from its oversold condition.
Look for a drop to 84.7.
My thought is to stop tracking the FXY and add another stock or two. For example, I could add FB, which is heavily tracked.
If this appeals to you, please email me at davismdt@gmail.com and let me know what stocks would appeal to you to track.
AAPL:
Major level: 212.50
Minor level: 210.94
Minor level: 207.81
Major level: 206.25 < HIT
Minor level: 204.69
Minor level: 201.56 **
Major level: 200.00
Minor level: 198.44
Minor level: 195.31
Major level: 193.75
Minor level: 192.19
Apple closed at 207.16. Next minor level is 207.81. Two closes above 207.81 and Apple should test 212.50.
212.50 should be a difficult level to break on the first attempt. Short term support is at 204.69.
Short term charts remain bullish. Technical support is also around 204.
WATCH LIST:
Bullish Stocks: AVGO, COST, MA, ZBRA, SHOP, MMM, CP, MCD, CME, DE, CMI, ADP, V, VRSK, XLNX, DIS, KLAC, DG, MSFT, RCL, PRU, MAN, ETN
Bearish Stocks: NFLX, HUM, BDX, CI, ALNY, SQ, COP, OXY, WSM, GRUB, HLF, EAT, JWN, SIG, CLVS, GES
Be sure to check earnings release dates.