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, we got the bounce from the oversold condition from Friday. No big surprise there.
The question I posed yesterday was how high can this reaction go?
There is still strong resistance at the midband of the long range bar on Friday. That price level is 2,880 and yesterday's close of 2,878.38 came to within 2 points of that level.
The next area that could offer resistance is around 2,892.
So, clearing these levels would be bullish.
As you know, one of the factors I look at to determine if a possible bottom is in, is the down to up volume.
And what is critical now is that the print I have for the down to up volume for Friday has been changed to 12.72.
This qualifies Friday as a selling climax.
This now means that the market has had three selling climaxes during this sell-off.
So, it is totally possible that we have seen the bottom of this sell-off.
The three pivot lows during this sell-off all have held at the 200 ema on the daily chart. The ema is 2,847.28.
Of course, the 200 ema is a level to watch to see if it holds.
And the 200 ema is above the midband, which is 2,810.36.
And the daily chart is bullish. So, there are a lot of factors that suggest that the selling could be over.
What is interesting is that the DOW did fall to its midband on the daily chart.
The second downswing actually breached the midband, but the DOW was able to recoup it.
And Friday's sell-off stopped right at the midband.
This to me is a key level of support and if violated, I would expect further selling.
The midband for the DOW is 25,669.87.
Yesterday's daily price bar did qualify as an inside day. And it closed at 96% of the range.
So, the expectation for today is that yesterday's high of 2,879.27 should be taken out.
And with the S & P trading about 3 points higher pre open, it certainly appears that will be the case.
Assuming this happens, then you need to watch the levels I mentioned above from Friday's daily bar.
Companies reporting earnings are slow this week as we wind down to the end of this earnings season.
Here are the Key Levels for the Markets:
$VIX:
Major level: 25.00
Minor level: 24.22
Minor level: 22.66
Major level: 21.88
Minor level: 21.10
Minor level: 19.53 **
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
The VIX closed at 19.23 yesterday. It dropped 0.64. With a close under 19.53, the VIX would still need two closes above this level to head higher.
As this point, 19.53 should become resistance.
Watch to see if the VIX can drop under 18.75 today.
Minor resistance is at 20.31.
SPX:
Minor level: 3,164.08
Major level: 3,125.00
Minor level: 3,085.95
Minor level: 3,007.85
Major level: 2,968.80 <
Minor level: 2,929.73 **
Minor level: 2,851.58
Major level: 2,812.50
Minor level: 2,773.45
Minor level: 2,695.35
Major level: 2,656.30
The S & P 500 closed at 2,878.38 yesterday. This is back above the major 2,968 level, which should be support.
2,856 should be minor support. And watch the minor 2,880.90 level. If the S & P can clear this level, it should be support.
QQQ:
Major level: 196.88
Minor level: 196.10
Minor level: 194.53
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
The QQQ closed at 184.82. If the QQQ can close above 182.81 today, it should head up to 187.50.
At this point, if the QQQ closes under 185.94 today, it should drop to 181.25.
IWM:
Major level: 162.50
Minor level: 160.94
Minor level: 157.81
Major level: 156.25
Minor level: 154.69
Minor level: 151.56
Major level: 150.00 <
Minor level: 148.44 **
Minor level: 145.31
Major level: 143.75
The IWM closed at 147.03. If the IWM can reclaim 148.44 today, it should head higher.
Watch for support at 145.31 and at 146.88.
Biased for a move up to 150.
TLT:
Major level: 150.00
Minor level: 148.44
Minor level: 145.31 **
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
The TLT closed at 145.37. Biased for a move up to 150. And the TLT is till above the upper band, which is 144.04.
143.75 should be support. And watch the minor 144.53 level today.
GLD:
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
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
Minor level: 135.16
The GLD closed at 144.19. The next level on the upside is 145.31. Two closes above that level and the GLD should test 150.
Like the TLT, the GLD is back above the upper band.
143.75 should be support.
XLE:
Minor level: 63.28
Major level: 62.50
Minor level: 61.72
Minor level: 60.16
Major level: 59.38 <
Minor level: 58.60
Minor level: 57.03 ***
Major level: 56.25
Minor level: 55.86
Minor level: 55.08
Major level: 54.69
The XLE closed at 56.20. The XLE is trying to recoup the 56.25 level. If the XLE can clear this level, it should head up.
55.86 should offer support.
The XLE is now seriously oversold. Watch this week to see if it gets a bid.
AAPL:
Major level: 225.00
Minor level: 221.88
Minor level: 215.63
Major level: 212.50 Hit
Minor level: 209.38
Minor level: 203.13 **
Major level: 200.00
Minor level: 196.88
Minor level: 190.63
Major level: 187.50
Minor level: 184.38
Apple closed at 206.49. Apple dropped almost $10 on Friday.
200 should be strong support for Apple. 206.25 should offer strong support.
WATCH LIST:
Bullish Stocks: SHOP, LMT, AMT, NEE, HSY, CCI, KLAC, MDT, WING, SHAK, EA, WEC, MRK, INXN
Bearish Stocks: NFLX, REGN, DOZ, TSLA, CLX, MMM, JAZZ, JNJ, FFIV, PSX, PKI, ALC, SQ
Be sure to check earnings release dates.
