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:
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RIG Long at $8.81
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CHKP Long August 16th - $110 call for $2.70
CHKP Short August 16th - $115 call for $0.60
DLTR Long August 16th - $102 call for $2.35
DLTR Short August 16th - $107 call for $0.40
EW Long September $210 Put at $8.00
EW Short September $200 Put at $4.30
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Yesterday, I did suggest a put debit spread on EW. I suggested you go out to the September monthlies so there is some time on the position. Having said that, I will close quickly if we get a strong bounce in the market.
And speaking of the market, yesterday was the large drop in one day since the 100.66 drop on February 2, 2018.
For the day, the S & P closed 87.31 points lower. This was a drop of 2.98%.
The DOW ended the day down 767 points. As I checked the market intra day yesterday, my thoughts were if the DOW would crack the 1,000 point level and the S & P down over 100 points.
That would not have surprised me with the selling pressure. Days like this tend to get exaggerated because the computers will kick in and continue to sell the market.
So what does this all mean and what are the implications for the market?
First off, the market is oversold. We know this by simply looking at a 60 minute chart of the S & P 500 and seeing that it has dropped under the lower band.
The lower band is 2,856.73. The S & P actually closed under this level, at 2,844.74. For a bounce to happen, the S & P needs to close back inside the lower band.
But, by virtue of the fact that the S & P has fallen under the lower band, the odds are especially high that the lower band will be retested after a bounce. And with the bearish long-range bar yesterday, there is strong resistance overhead. The major resistance level is 2,860, which is the midpoint.
Resistance is also at 2,871.
The second fact from yesterday is that the down to up volume was 6.66. This is not at a climax level, which tells us that there should be more selling to come.
Having mentioned the bearish scenarios, let me share where I see support for this market.
The first support level is the midband and the S & P and in 7 days the market is almost back to it. That price level is 2,807.47.
As you know, this should offer support. But, if it fails, then the target would be back to the lower band, which is 2,472. That would be a further drop of about 400 points.
In looking at the resistance levels, a drop to the 2,656.30 level would be considered a normal correction in a pullback. That would be a two-level drop off the top. A three-level drop would send the market down to 2,500.
I would expect support at 2,656 on a drop to that level.
The daily chart is still in an uptrend, so I do believe we see a rally. But, the main bearish scenario is that the S & P has moved strongly back inside the upper band on its monthly chart.
As you know, this is a level we have been monitoring and it now reads 2,939.31.
Yesterday's close put the market about 100 points under it.
And because the market took out the upper band, a retest should be expected.
The trade wars will certainly continue to impact this market, which is something we knew. The escalation is what was the unknown. Or I should say the timing of the escalation.
Earnings do continue this week. The biggest name will be the earnings from NVDA on Thursday.
Here are the Key Levels for the Markets:
$VIX:
Major level: 28.13
Minor level: 27.35
Minor level: 25.78
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
The VIX spiked up 6.98 to close at 24.59. This was a jump of 39.64%.
The VIX has moved up 4 levels from the bottom, which suggests that there will be selling to come.
At this point, 21.88 should be support on the downside.
The VIX is overbought in the short term. And a pullback should suggest we will see a bounce in the market. A reversal to the downside would confirm that.
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 key in the short term is the minor 2,851.58 level. The S & P will have to reclaim this level today to make a decent bounce. If it can't, I would project a drop to the 2,706 area.
And if it can't close above 2,851.60, then 2,900 should be strong resistance.
But, the S & P did break under the lower band on the 60 minute chart, so a retest is highly probable.
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 180.73. The QQQ dropped to under the minor 179.69 level, but managed to recoup it.
Like the S & P, the QQQ is oversold in the short term. The lower band on the 60 minute chart is 180.29 and the QQQ managed to close just above it.
Seems like the better market to trade for a bounce.
Watch to see if the QQQ can close above 181.25. If it can, a buy with a tight stop just under 181.25 would be the set up.
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
Like every market, the IWM broke hard. For the day it was down 4.58 points or 3%. It closed the day at 148.
This suggests that if the IWM closes under 148.44 today, it should drop to 143.75.
150 should now be resistance.
TLT:
Major level: 140.63
Minor level: 139.85
Minor level: 138.28 **
Major level: 137.50 <
Minor level: 136.72
Minor level: 135.16
Major level: 134.38
Minor level: 133.60
Minor level: 132.03
Major level: 131.25
Minor level: 130.47
The TLT closed at 138.87, closing about 1.30 above the. 137.50 objective.
This now suggests that if the TLT closes above 138.28 today, it should move up to 140.63.
Overbought in the short term.
GLD:
Major level: 140.63
Minor level: 139.85
Minor level: 138.28
Major level: 137.50 <
Minor level: 136.72
Minor level: 135.16
Major level: 134.48
Minor level: 133.60
Minor level: 132.03
Major level: 131.25
Minor level: 130.47
Minor level: 128.91
The GLD closed at 137.79. The GLD did hit the 137.50 objective we were looking for. The upper band is 137.79 and the GLD did close above it.
135.16 should be support on a pullback.
XLE:
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 <
Minor level: 58.60
Minor level: 57.03
Major level: 56.25
The XLE closed at 58.60. At this point, I expect a drop to the 56 area.
Resistance should be at 60.94 and 62.50.
AAPL:
Major level: 212.50 <
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
Minor level: 178.13
Major level: 175.00
Apple closed at 193.34, dropping 10.68. It certainly took out the 200 objective we were looking for.
193.75 is a key short term level. If Apple cannot hold it, I would expect a drop to the 175 area.
192 is the midband and Apple is just above it. Watch to see if this level holds today.
WATCH LIST:
Bullish Stocks: SHOP, MLM, MCO, LHX, WIX, RNG, GLD, VMC
Bearish Stocks: BA, DPZ, DXCM, URI, FIVE, FANG, EOG, LGND, JACK, CXO, GRUB, COP
Be sure to check earnings release dates.
