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 saw the expansion that we have been looking for based on the series of contractions that the market had been experiencing.
The S & P 500 closed 35.81 points to the downside, while the intra day range was only 27.63.
This was due to the bearish gap open. The market opened 8.64 points to the downside and just sold off all day.
The down to up volume was 6.68. Not enough to qualify as a selling climax, but it was approximately the level back as July 6th, which did in fact turn the markets.
What I find compelling is how a few short weeks ago, the pundits and talking heads were all discussing that perhaps the VIX was losing its predictive ability and perhaps is not a useful tool to help gauge the market and maket turning points.
Looks like all it needs is a few disparaging comments from a few world leaders to see the VIX have one of its rapid spikes.
But, it not's like we were not aware that the VIX was at all time lows. And continuing to hover around the major 9.38 support level.
The big question has always been and will always be, is when does it begin its move?
Its the timing element that always proved difficult to drill down.
In other words, we have a decent understanding when the VIX should move, the tough part is timing it.
The million dollar question at the moment is simply this. Is this just a normal pullback or is it the start of a bigger correction?
Let me answer this by starting with the monthly chart. As you know, every webinar I track the upper band levels for the major markets.
I do this because the markets are at extreme levels. But, that does not mean they will just roll over.
Even with this recent slide, the S & P 500 is still trading above the upper band on its monthly chart. That price level is 2,400.17 and yesterday closed out at 2,438.21.
So, you can see that the S & P is still almost 40 points above the upper band.
A close under the upper band would make me suspect that perhaps a much deeper correction is coming.
Needless to say, the 2,400 level is a price level to watch.
The second issue at the moment is that the S & P 500 is oversold short term.
We know this by the simple fact that it is trading under the lower band on its 30 minute chart.
This also sets up a scenario where the S & P 500 should test the lower band again after it does finally bounce.
The final comment is regarding the VIX. The VIX closed out at 16.04, just above the 15.63 level. This is close to the 16.41 level, which is the upside confirming line to 18.75. Two closes above 16.41 and the VIX should test 18.75.
Having said that, the upper band on the daily chart for the VIX is 17.86. If the VIX does spike above the upper band it will create an opportunity to get long the market.
NVDA reported and is trading about $11 to the downside pre open.
Watch the major 2,437.50 level. If is is violated, I would expect support at the 2,417.98.
Continue to follow the resistance levels.
Here are the Key Levels for the Markets:
$VIX:
Minor level: 16.41
Major level: 15.63
Minor level: 14.84
Minor level: 13.28
Major level: 12.50
Minor level: 11.72
Minor level: 10.16 **
Major level: 9.38 <
Watch to see if the VIX can hold 16.41. A drop in the VIX would indicate a bottoming action for the markets.
Shorter term, the 17.19 is a key level. If this level is taken out, the VIX should move higher. But it it fails under that level, a move up on the markets could be happening.
$SPX:
Major level: 2,500.00
Minor level: 2,484.38
Minor level: 2,453.12 <
Major level: 2,437.50 **
Minor level: 2,421.88
Minor level: 2,390.62
Major level: 2,375.00
Minor level: 2,359.38
Minor level: 2,328.12
Major level: 2,312.50
The S & P 500 closed just above the major 2,437.50 level. I do feel the market could drop to the 2,375 level and the bull market would still be in affect.
A lower move would make me concerned.
2,406 is also a major support level.
QQQ:
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
Minor level: 142.18 ***
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
The QQQ closed under 142.18. A close today under that level implies a move down to 137.50.
Having said that, short term support is at 140.63 and 139.06. A break under 139.06 would imply further movement to the downside.
IWM:
Major level: 146.88
Minor level: 146.09
Minor level: 144.53
Major level: 143.75
Minor level: 142.97
Minor level: 141.41
Major level: 140.63
Minor level: 139.85
Minor level: 138.28 **
Major level: 137.50 <
Minor level: 136.72
The IWM closed at 136.27, under the major 137.50 level.
A close today under 136.72 and the IWM should drop to 134.37.
135.94 is a minor support level. If it is violated, look for the IWM to head lower.
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: 123.03
The TLT closed at 126.37, just under the 126.56 objective.
125.78 should be minor support.
GLD:
Major level: 125.00
Minor level: 124.22
Minor level: 122.66
Major level: 121.88
Minor level: 120.32
Minor level: 119.53 <<
Major level: 118.75 **
Minor level: 117.97
The GLD continues to bounce and closed at 122.21.
123.44 should be strong resistance. And support should be at 121.88.
XLE:
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
Support for the XLE is at 64.06 and it is trading just above it. A break under that level and the XLE should test 62.50.
63.28 should be minor support. And 64.85 resistance.
FXY:
Minor level: 87.89
Major level: 87.50
Minor level: 87.11 <
Minor level: 86.33
Major level: 85.94 **
Minor level: 85.55
Minor level: 84.77
Major level: 84.38
Minor level: 83.60
Minor level: 83.20
Major level: 82.81
The FXY closed above 87.50, at 88.10. A close today above 87.89 implies a move up to 89.06.
87.70 should nw be support. 88.67 is minor resistance.
AAPL:
Major levels for Apple are 162.50, 159.38, 156.15, 153.13, and 150.
Apple sold off with the rest of the market. It closed at 155.32, down 5.11 on the day.
157.81 should now be resistance. The key short term level is 154.69. Two closes under that level and Apple should drop to 150.
WATCH LIST:
Bullish Stocks: LMT, NOC, HUM, BIDU, STMP, UNH, LLL, RTN, ALGN, AET, AAPL, VRTX, CB, SYK, ACN, RCL, COL, AMT
Bearish Stocks: PANW, JACK, PRGO, WAGE, TEN, SGEN, CAKE, FLS, OMI
Be sure to check earnings release dates
