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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Just as it seemed the S & P 500 would continue its slide, it finds support and manages to rally to close at 2,637.72.
There were a few different levels we need to examine at this time. The first is the minor 2,634.30 level.
Friday was the first close under the minor 2,634.30 level. And yesterday managed to reclaim it.
This means that the objective down to 2,597.70 was not confirmed and the likely scenario is that the market should bounce.
But, the major pattern was that the S & P 500 had two consecutive closes under the major 2,646.50 level.
This confirms a move lower. The likely downside objective should be the 2,500 to 2,550 area.
And higher levels should be resistance. I would expect strong resistance at 2,695.30.
Consider the 2,646.50 level as looking at the market from a broader perspective. It's similar to looking at a monthly chart as opposed to a daily chart if that makes any sense. If it doesn't, you can always email me and I will try to explain it better.
But, I do think the fact that the market has confirmed to the downside helps to shape how to trade in the short term.
For example, if you do go long, you may want to limit your buy-in, or use a debit spread instead of buying stock outright.
And if we do get a rally up to the 2,700 area, you may want to consider put protection on your portfolio. If that is not an option, puts on the overall market should be considered.
I know I sound rather bearish, but this pattern around my resistance levels is highly reliable. Of course, nothing is perfect when it comes to the markets, but if you have been a reader of this update for a while, you know how accurate these levels can be.
One element I don't mention too frequently is time and reversals in time.
Time, to me, is secondary to price, but there are a few dates worth noting.
Based on time lines I follow, which are similar to the price resistance levels, potential turning points are this coming Friday, the 14th. And the next major time line projects out to January 3rd of next year.
But, as I said, I consider the price lines more important.
And the two price lines to consider at the moment are the minor 2,658.70 line and the major 2,695.30 level.
The first minor bears significance because if the S & P 500 has two closes above 2,658.70, it would suggest a move up to 2,695.30.
And at this point, I would expect strong resistance at 2,646.50. If the market does rally to that level and reverses, I will suggest a short. But I am getting ahead of myself.
I just want you to be aware of the levels and their significance, at least to me, at the moment.
Pre open, the markets are sharply higher. But, we would expect a violation of yesterday's high before the low due to the fact that the close percentage was 85%.
Yesterday's high was 2,647.51 and pre open the S & P 500 is trading about 22 points higher.
This projects to an open around 2,660. Watch to see if the S & P 500 can hold the minor 2,658.70 level.
The resistance levels from Friday's long-range bearish bar should still be valid. That resistance area is around 2,662 to 2,666.
And last week's long-range candle should also offer resistance. That area is right around 2,710.
Be aware of these various levels and watch how the market reacts as they trade to them.
Continue to monitor the levels as I mentioned above.
Here are the Key Levels for the Markets:
$VIX:
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00
Minor level: 23.44
Minor level: 20.31 **
Major level: 18.75 <
Minor level: 17.19 **
Minor level: 14.06
Major level: 12.50
The VIX closed at 22.62. The high for the day was 25.94 before dropping to close lower.
The VIX still cannot close above the 25 level which does suggest it will continue to offer resistance until it is violated.
If the VIX breaks under 21.88, expect it to head lower.
18.75 should offer support on the downside and possible 20.31.
SPX:
Minor level: 2,805.20
Major level: 2,793.00
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10
Minor level: 2,731.90
Minor level: 2,707.50
Major level: 2,695.30
Minor level: 2,683.10
Minor level: 2,658.70
Major level: 2,646.50 <
Minor level: 2,634.30 ***
Minor level: 2,609.90
Major level: 2,597.70
We should have a bullish gap open that projects to open above yesterday's high. Yesterday's high should be support on a pullback. Yesterday's high was 2,647.51.
And if the S & P 500 can get above 2,651.40, look for support at that level.
Short term charts remain bearish.
QQQ:
Major level: 175.00
Minor level: 173.44
Minor level: 170.31
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
Just like the S & P 500, the QQQ reversed and closed at 163.07. It closed up 1.69.
The next minor level on the upside is 164.06. Two closes above that level and the QQQ should test 168.75.
The QQQ needs to clear 165.63 to continue higher.
IWM:
Minor level: 151.56
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75 < <
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
Major level: 131.25
The IWM closed at 143.60. It closed down 0.42 on the day.
The IWM had its first close under the major 143.75 level. It will have to reclaim that level to invalidate the downside pattern.
The IWM is in a downtrend on its daily chart, so consider any rally a bounce in a bear market.
TLT:
Major level: 121.88
Minor level: 121.49
Minor level: 120.70
Major level: 120.31
Minor level: 119.92
Minor level: 119.14 **
Major level: 118.75
Minor level: 118.36
Minor level: 117.58
Major level: 117.19
Minor level: 116.80
Minor level: 116.02
The TLT closed at 118.90. With the TLT trading above the 118.75 level, look for support around that level. If 118.75 is taken out, I would expect strong support at 117.19.
Trading as if a rate hike has been cancelled. Buy support.
GLD:
Major level: 121.88
Minor level: 121.10
Minor level: 119.53 **
Major level: 118.75 <
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
Minor level: 114.85
Minor level: 113.28
Major level: 112.50
The GLD closed at 117.68. Like the TLT, the GLD will need to clear 118.75 to head higher.
A failure at 118.75 would suggest the GLD should drop.
118.35 is minor resistance and 117.38 is minor support. 115.63 should be support on the downside, unless it is taken out.
XLE:
Minor level: 72.66
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
The XLE closed at 63.07. The XLE did hit the 62.50 level. The low for the day was 61.62.
Hopefully, we get a nice rally that we can short.
FXY:
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
Minor level: 84.58 **
Major level: 84.38 <
Minor level: 84.18
Minor level: 83.79
Major level: 83.59
The FXY closed at 84.32. Resistance is at 84.58.
Two closes under 83.98 would confirm a move down to 82.
AAPL:
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
Minor level: 164.06
Major level: 162.50
Apple finally getting a bid. But, with the oversold condition, that should be expected. Yesterday's low was 163.33 before it rallied back to close at 169.60.
It did essentially test the 162.50 level. If Apple had broken under 162.50, I would have expected more selling pressure.
I would expect Apple to bounce around these lows. Straddles or strangles should be considered.
WATCH LIST:
Bullish Stocks: REGN, AMT, WDAY, RH, CCI, DLR, RCI
Bearish Stocks: BA, LMT, NOC, FLT, GS, GD, RTN, ASML, NVDA, CXO, UTX, FANG, PLCE, PSX, ABC, CRI, EA, VLO
Be sure to check earnings release dates.