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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The S & P 500 closed out 0.53 lower yesterday. It closed at 2,650.54. It got as high as 2,670.19 before dropping to a low of 2,637.27.
And once again, the market gapped higher at the open only to give back those gains.
And once again, our close percentage put the odds of violating Wednesday's low before the high was accurate.
As I said yesterday, I was biased for a violation of Wednesday's low before the high.
These are all symptoms of a market that is struggling to gain footing.
Gap opens that fail to follow through are one symptom. Another symptom is that weak markets tend to sell off into the close.
In strong markets, it the opposite.
A bear gap is generally an opportunity to buy. And the market will tend to move higher into the close in a strong market.
By knowing some general tendencies of how a market should trade during different market phases, it can help you to determine what the market should do. If this changes, it is also telling you something.
As it turned out yesterday, the S & P 500 had a narrow range day. The range was only 32.92 points as compared with the average true range of 50.39.
The range was only 65% of the average.
This tells us to expect an expansion. And the resistance level from yesterday's daily bar is in the 2,654 area.
And pre open, the S & P 500 is trading about 23 points lower. This projects to an open around 2,728, which is below yesterday's low by about 10 points.
This would suggest that yesterday's low of 2,637.27 should be resistance on a rally.
It is looking more and more like we will not get the rally up to the 2,695 level. This is the level I would get positioned short.
But with a projected open under 2,646.50, we will have to see how the market trades and if it can rally back to this level.
At this point, I am still biased for a move down to 2,500 and it is looking more and more like this will be a reality.
I hope I am wrong and we see a rally before it does drop to that level.
In taking a quick look at the weekly price bar, we see the range for the week through yesterday is 102.21.
With an average true range of 91.36 points, it suggests that the high and low for the week have already been made.
The question is where will the weekly bar close?
The midpoint of the weekly bar so far is 2,634. Today should open about 7 points under this level. This would suggest you want to see how the market trades around this level on a rally.
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 20.62. The VIX is still holding above 20.31. Watch to see if this continues as support.
If 20.31 does not hold, I would expect a drop to 18.75.
On the upside, minor resistance is at 21.88.
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
With a projected open under 2,646.50, you want to see if the market can reclaim this level in a rally. It should be resistance so a violation to the upside would be bullish.
The next minor level on the downside is 2,634.40. Two closes under 2,634.40 and the S & P 500 should drop to 2,597.70.
2,627 is a minor support level. A break under this level would suggest a drop to 2,602.
Short term charts remain bearish, so long trades should be considered counter-trend.
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
The QQQ closed at 165.10. It closed up 0.10. If the QQQ can close above 164.06 today, it should test 168.75.
Watch the 165.63 level. If the QQQ cannot clear this level, I would expect a drop to 162.
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 142.77. It closed down 2.05 on the day.
Two closes under 142.19 suggest a drop to 137.50.
140.63 is a minor support level. Expect the IWM to continue lower if it is violated.
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 118.07. Biased for a drop to 117.19.
The TLT is quickly testing the midband on the daily chart. That price level is 117.72. It should be support. So, a break under it would indicate the TLT should pullback more.
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 117.53. A close today under 117.97 suggests a drop to 115.63.
A failure at 118.75 would suggest the GLD should drop.
117.97 is a minor resistance level. Watch to see if the GLD can clear this level as well. If it can, it should test 118.75. If it can't I would expect a drop to 115.63.
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 63.54. Yesterday was the second close above 63.28. Biased for a move up to 65.63.
Watch for consolidation around 62.50. If it does, I would expect a short term bounce.
Hopefully, we get a nice rally that we can short. I expect lower lows.
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 84.11. 83.79 should be support. Watch to see if this holds. If it can't, I would expect a drop to 83.59.
Two closes under 83.98 would confirm a move down to 82.
The FXY is oversold and I do expect a bounce.
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 closed at 170.95 yesterday. Watch the 170.31 level today.
A failure to close above 170.31 would suggest a test of 168.75.
Short term charts remain bearish.
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.