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
SNAP Long at $14.54
Total Premium Collected - $2.20
SNAP May 4th $11.50 call for $0.13
SNAP May 4th $10.40 call for $0.68
RRC Long at $11.85
Total Premium Collected $0.70
RIG Long at $8.81
Premium Collected - $1.45
FEYE Long at $17.18
Total Premium Collected $0.80
CLW Long May - $20.00 call for $2.00
AMC Long at $16.16
Total Premium Collected $0.35
GRUB Long May 4th $66 call for $1.60
GRUB May 4th $70 call for $.40
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I suggested two positions yesterday. The first was a short term debit spread using the front week calls on GRUB. This trade is based on a short term oversold condition and a bounce in the stock. Again, I warn against overtrading these positions.
The second position was a defensive position on SNAP. I suggested a call credit spread using the front week options and selling calls slightly in the money. I believe that SNAP is overbought in the short term and instead of buying puts, I suggested using the asset for some protection.
Now onto the markets.
The S & P 500 closed at 2,943.03. For the day it was up 3.15 points. The high for the day was 2,949.52. So, this puts the market within 20 points of the objective we have been calling for.
The thrust for the market is clearly getting smaller.
For the day, the S & P 500 had a range of 10.17 points. The average true range now reads 19.77 points.
This is the first time since October 4, 2018 that the average true range has fallen under 20 points.
An ominous sign?
Well, considering that the market topped out two weeks prior to this, I would say so.
But when the market topped out last year, there were six weeks of price action where the daily average true range was under 20.
So, like the sentiment indicators, the market could continue higher when they are at overbought levels. The timing is not perfect. But, it does signal a warning.
The questions at this point are these.
Do we clear the major 2,968.80, and if we do, what do we expect?
As I said before, this would be bullish and I would expect prices to head higher. But when a major level is violated, a pullback is not unexpected.
If the market fails to clear 2,968.80, what should be expected?
In this scenario, I believe a lot depends upon whether the daily chart can cross into an uptrend.
At this point, the 200 ema reads 2,757.52 and the 253-day average is 2,762.18.
As you can see, they are very close to crossing to the upside.
If the daily chart does have a bullish crossover, I would expect support at the midband which is the 2,762 level.
That level is about 200 points below where the market is trading now and if it dropped to the level, the uptrend would still be intact.
And a two-level drop off the top would bring the S & P 500 down to 2,812.50. By the way, a three-level drop would be to 2,734.40 or very close to the midband.
So, there are a number of key factors all converging at the same time.
And that also certainly includes the VIX, which is down to all-time lows once again. As I have said before, I would expect two closes above 13.28 to signal a deeper rally in the VIX. And at this point, we still have not had that. In fact, yesterday's high came to 13.27 before the VIX closed at 13.11.
The support area from yesterday's daily bar is in the 2,942 to 2,944 area.
Pre open, the S & P 500 is relatively flat.
Google did report last night and is off about $100 pre open.
Apple reports after the close this afternoon and will no doubt be closely followed.
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 13.11. The VIX did get to a high of 13.27, before closing under the 13.28 level.
The 13.28 level once again offered resistance as we expected.
But yesterday was the second divergence between the VIX and the S & P 500 in a week.
Watch to see if the VIX can break under 12.50. If it does, I would expect the VIX to head lower.
12.89 should be minor resistance. And 13.67 should be resistance.
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
The upside objective is still to 2,968.80. And the S & P 500 continues to inch higher towards the target. Watch for potential support or resistance at yesterday's close, which was 2,943.
And there is minor resistance at 2,954.10. And minor support is at 2,939.50.
Short term charts remain firmly bullish.
Continue to buy against support. Technical support is around 2,926.
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 191.02. The next objective for the QQQ should be to 193.75 and the QQQ continues to inch closer.
And 190.63 is minor support as well. If that does not hold, look for 189.84 to hold.
Technical support is around 190.
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 159.03. The objective for the IWM should be to 162.50.
Now that the IWM has cleared the midband, look for support there. It now reads 156.34.
Minor support is at 157.81.
Both short term charts are bullish. And technical support is around 157.
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 123.02. A close today under 123.05 would void the attempt at 125.
123.44 should now be resistance. And minor support is at 122.66.
If the 30 minute chart cannot cross into an uptrend, then I would expect lower prices.
Technical resistance is still at 123.40.
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 120.83. 121.09 is minor resistance. And 119.53 is minor support.
A break under 119.53 and the GLD should head lower.
Technical resistance at 121.45. And minor technical support is at 120.50.
Both the 30 minute and 60 minute charts remain bearish.
XLE:
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 <
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 66.16. 65.63 should still be a major support level. And 66.02 is minor support.
With a break under the midband, that level should now offer resistance on a rally. That level is now 68.71.
The 30 minute chart has crossed into a downtrend. Short term momentum is shifting to the downside.
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 204.61. Next minor level is 207.81. Two closes above 207.81 and Apple should test 212.50.
Watch the 204.69 level. Apple has to reclaim this level to head higher. They do report this afternoon, so I would not suggest trading ahead of earnings.
Short term charts remain bullish. And technical support is also around 200.
WATCH LIST:
Bullish Stocks: NOW, FLT, MA, LRCX, WDAY, VRSN, HON, CRM, V, ADP, DECK, CME, CB, DIS, WIX, MSFT, SPLK, KLAC, HSY, ADI, PYPL, TSCO
Bearish Stocks: TSLA, SPOT, CVX, PSX, RHI, WSM, WBA, BG, Z, STLD
Be sure to check earnings release dates.