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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Yesterday, the S & P 500 closed 58.99 points to the downside. It ended up closing at 2,581.88. I've mentioned that I felt this market was going to the 2,500 level and now it is only 82 points away from it.
And I heard a lot of chatter on the financial news networks how the S & P 500 had taken out its 200 day average. The general mainstream media tend to follow a simple 200 day moving average.
And yes that is true. The simple 200 day moving average is 2,589.85. So, the S & P 500 did close under that average.
I tend to use the exponential moving averages. And the 200 day exponential moving average is 2,599.05. So, the market closed under that level as well.
So, the market closed under both these long term averages.
However, the mid band on the extreme bollinger band is 2,547.69. This of course, is not a widely followed average.
When you use the extreme settings I suggest, your inputs are a 253 day setting with a 2.576 standard deviation offset.
The bands are calculated using a simple moving average.
Based on the settings above, the midband is 2,547.69. And the S & P 500 closed about 34 points above the midband.
What makes this relevant and important to us at the moment is this.
Usually, when price exceeds the upper band, which the S & P 500 did back at the top on January 26th, the price objective after coming back inside the upper band, is back to the midband.
So, the market is right back to testing the midband.
At this point, one of two things should happen. The first is that the midband holds as support. Or the second scenario is that market breaks through the midband.
And usually if the midband cannot hold as support, the next objective is back to the lower band.
The lower band is 2,195.89. So, a break under the midband would indicate a further drop in the market of about 400 points.
What is interesting about these price levels is this. I had mentioned a while ago that I felt the target was to 2,500. And are now within reach of that level.
I also mentioned that if the 2,500 level is taken out, a drop to the 2,000 to 2,125 level is possible.
A drop to the lower levels would put the market around the lower band.
At this point, we have very succinct technical levels to watch to help us determine if these longer term projections hold true.
The first of course, is the 2,500 resistance level. This should be a strong support level and I would expect it to hold.
And the second level is the midband, which is 2,547.69.
Of course, the market will not drop directly to these lower levels, if the support levels do not hold.
There will be counter moves all the way.
The timing of the bounces can be determined by selling climaxes. And the selling pressure yesterday did qualify as a selling climax.
The down to up volume was 10.54. So, this was the second climax in this recent downswing.
The other factor yesterday was that the S & P 500 stopped at the lower extreme band on both its 30 & 60 minute charts.
This tells us to expect a bounce.
Resistance from yesterday's daily price bar should be in the 2,596 to 2,607 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 23.57 yesterday. Yesterday's high was 25.72, or 72 cents above the 25 level. I do expect resistance at 25.
And the upper band on the daily chart for the VIX is 23.74. Watch to see whether the VIX can clear the upper band or is repelled.
$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
At this point, 2,548.80 should offer support. And watch the major 2,578 level to see if it holds as support.
To move higher, the S & P 500 needs get above 2,597.65.
2,646.50 should be minor resistance.
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 155.51. At this point, I am looking for resistance at 159.38.
If 159 is cleared, major resistance should be at 162.50.
IWM:
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: 147.66
Major level: 146.88
The IWM closed at 148.13. A close today under 149.22 and the IWM should test 146.88, which is a key level.
Two closes under 146.88 and the IWM could test 138.
153.13 should offer resistance.
TLT:
Major level: 123.44
Minor level: 123.05
Minor level: 122.27 **
Major level: 121.88 < Hit
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 121.88, exactly on the 121.88 level. It will have to clear 121.88 to move higher. If it can't, look for a pullback.
120.31 should continue to offer support. To move higher, the TLT will need two closes above 122.27.
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 127.26. Watch the minor 126.56 level today. If the GLD breaks under that level, it could drop to 125.
125 should continue to be support.
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 66.06. It continues to hold just above the 65.63 level. 65.63 should offer support.
The XLE will need two closes above 66.41 to move up to 68.75. Oversold and a bounce is expected.
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 Thursday at 90.52. 90.83 should be resistance. A reversal off 90.63 and the FXY should drop to 89.45.
The FXY is bouncing just under the upper band on the daily chart. The upper band is 91.21.
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 166.68. 165.63 should be minor support.
Oversold. Look for a bounce.
WATCH LIST:
Bullish Stocks: DPZ, SBAC, GWW, AMT, RL, CCI, EXP, PSX, LULU, PGR, PEG, DK, WY, CNQ, LPX, MDU
Bearish Stocks: TSLA, WHR, ALXN, ZBH, SWKS, ALB, ALK, MDSO, DIS, WAGE, SIG, WPZ, JNPR, BITA
Be sure to check earnings release dates.