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.
CURRENT POSITIONS:
GOGO Long at $19.93
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APA Long Oct $47.50 Call at $3.45
FEYE Long at $14.39
FEYE Short Sept 1st $14.50 Call at $0.23
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So yesterday we had the extreme bear gap open and the market rallied back all day to close higher.
The S & P 500 opened at 2,431.94 and dropped down to a low of 2,428.20 before staging the rally.
The question for us is this ... would buying make sense at that low?
Well first off, we had been looking for a retest of the lower band on the 30 minute chart. This was based on the fact that price breached the lower band on the 18th and 21st.
And as I mentioned, for a bullish move to ensue, the typical pattern is that price should hold above the lower band. the lower band is 2,412.22.
The second question to address is this ... what made 2,428.20 significant?
As I mentioned, the open gap on the 30 minute chart is at 2,430. What I did not mention is that the close of the gap bar was 2,438.37. This was within 17 cents of the low.
The trigger for buying was the fact that the VIX hit and a high of 13.59, just 31 cents above the minor 13.28 resistance level I mentioned.
If you scale down to even shorter term intra day charts, you will see that the VIX was above the upper band on its 3 minute chart and its 10 minute chart was in a downtrend. This set up also confirms that the VIX should drop.
And not without coincidence, price had dropped under the lower band on the 3 minute chart for the S & P 500, and its 10 minute charts was in an uptrend.
This set up usually creates a buying opportunity.
What is interesting is after the S & P started to rally, it came right back to the 2,444 area. This was the level tested the prior four days.
Price finally broke through and the S & P 500 ran to a high of almost 2,450.
So, now the market is above the weekly support area of 2,436 to 2,439. This area should now act as support.
Pre open, the S & P 500 is trading slightly to the downside. Support should be around the 2,439 area.
Continue to follow the resistance levels.
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: 14.84
Minor level: 13.28
Major level: 12.50
Minor level: 11.72
Minor level: 10.16 **
Major level: 9.38 <
The key again should be the 12.50 level. If the VIX clears 12.50, it should head higher. The minor 13.28 and 14.06 levels would be the objectives and resistance.
For the VIX to head higher above the 12.50 level, it will need two closes above the 13.28 level.
$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
On the downside, the minor 2,429.70 level should be tested. Two closes under this minor level and the S & P 500 should test 2,406.
I would expect the major 2,437.50 level to offer support.
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
Like the S & P 500, the QQQ had a strong reversal yesterday as well. It closed at 142.97.
143.36 is minor resistance and a level the QQQ needs to clear to head up. 139.06 should offer support.
IWM:
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
Minor level: 135.15 <
Major level: 134.37
The IWM closed one cent under 137.50. 136.72 should be minor support. And 139.06 is minor resistance.
TLT:
Major level: 128.13
Minor level: 127.74
Minor level: 126.95 **
Major level: 126.56 <
Minor level: 126.17 **
Minor level: 125.39
Major level: 125.00
Minor level: 124.61
Minor level: 123.83
The TLT hit the objective of 128.13. The high for the day was 128.52, before the TLT pulled back and closed at 127.65.
127.74 should be key today. A close today under that level and the TLT should drop to 126.56.
A retest of 128.13 would be expected after a pullback.
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 hit a high of 125.87, before closing lower at 124.42.
To move lower, the GLD would need two closes under 124.22.
122.66 should be minor support. And 123.44 as well.
XLE:
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 continues to try and hold the major 62.50 level. If this level is violated, I believe the XLE could drop to as low as 48. Same as yesterday.
To move lower, the XLE will need two closes under 61.72.
62.30 is a minor support level. If this price is violated, look for a move down to 61.72.
FXY:
Major level: 89.06
Minor level: 88.67
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
The FXY hit a high of 88.67, before closing at 87.59. This is still above the major 87.50 level.
At this point, the the FXY is overbought. On the upside, the FXY would need to cleat 89.06 to head higher.
A break under 87.50 and the downtrend could resume.
AAPL:
Major levels for Apple are 162.50, 159.38, 156.25, 153.13, and 150.
Apple finally took out the 162.50 major level. The high yesterday was 163.12.
Next level up is 165.63. 163.28 is minor resistance and 161.33 should be support.
WATCH LIST:
Bullish Stocks: NOC, HUM, ANTM, LLL, RTN, BABA, AAPL, MCD, SBAC, ADBE, AMT, BLUE, CRM, CNC, SPLK, AABA, ATVI, WERN
Bearish Stocks: ULTA, GWW, FLT, AGU, VRSK, OMC, AKAM, CAKE, SAVE< OTEX, STX, BGS, OMI
Be sure to check earnings release dates.
