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
Total Premium Collected $1.95
ASNA Long at $14.20
Total Premium Collected $0.75
DUST Long $4.50
Total Premium Collected $0.70
SNAP Long at $14.54
Total Premium Collected - $1.65
OI Long Feb $19 call @ $1.70
MDR Long @ $9.31
TEVA Long at $15.30
TEVA Short Jan 4th-$15.50 Call @ $0.45
CVX Long Jan 18th - $105 Call @ $1.10
CVX Short Jan 18th - $108 Call @ $0.25
.........................................................................................
You should have been able to close out the long $25.50 put on PHM on Friday, with the suggested order. If you were able to watch the market, then it was not necessary to close out the short $24 put because the stock settled about $1 above that strike. But, if you did close it out for a nominal amount, it is not a big issue.
With the down-spike on Friday, the overall loss on the position was minimal.
Yesterday, I suggested two positions. The first was a weekly covered call on TEVA. And the second was a debit spread on CVX.
The next market closure will be on New Year's Day, January 1, 2019. That is next Tuesday.
Yesterday, we got the proverbial dead cat bounce we had been looking for. For the day, the S & P 500 closed to the upside 116.61 points. And the DOW had its biggest one day gain in history. The DOW was up 1,086.25 points, or 4.98%.
The gain in the S & P 500 almost matched the DOW and was up 4.96%.
The move for the NASD Composite was even bigger. It closed up 5.84%.
But, as I said, we had been looking for a bounce. Why?
Simply because major markets were trading under their lower extreme bollinger bands. The settings I use should contain 99.9% of all price action. And when they are violated, it represents an extreme condition.
What is interesting about yesterday is this.
Even with a massive rally of 116.60 points in the S & P 500, it is still trading under its lower bollinger band.
The S & P 500 closed at 2,467.71 and the lower band is 2,499.69. So, you can see it is still oversold and about 22 points under the lower band.
We know that after this rally, there will be a very high probability that the market will retest the lower again.
At least, that is the scenario I am looking for.
The lower ban set up also translates to individual stocks. As of Monday's close, there were 553 stocks that traded under their lower band on their daily charts.
And as of yesterday's close, there were still 282 stocks that traded completed under their lower bands. Stocks like GS, LMT, FDX, RTN and NVDA.
FDX is probably one of the most oversold stocks I have ever seen. Yesterday, it closes up 7.45 at 160.15. And the lower band is 188.28. Even with yesterday's bounce, it was still 28 under its lower band.
Trading when stocks move under their band can be quite profitable. But, there is no guarantee the stock will turn when you want it to. In fact, it could continue to drift lower before it finally gains some traction.
A better way to trade this set up is when price does close back inside the lower band. In fact, at yesterday's close there were 289 stocks that fit that parameter.
These include stocks like BIDU, FLT, AGN, CVX, URI, GILD, CELG and CRI. This set up also included the QQQ, DIA and the SPY.
If you would like a complete list of stocks that fit this set up yesterday, send me an email at davismdt@gmail.com and I will be happy to forward you the list.
So, after the large range day yesterday, the market is selling off pre open. As I write this, the S & P 500 is trading to the downside about 33 points.
With the large range day yesterday, I would expect strong support in the 2,407 to 2,415 area.
And the projected open should be around 2,433 or about 18 points above the high end of the support area. Watch to see if the market holds support at around 2,415.
If we scope back to the formation of this week's weekly bar, we see the midpoint so far is 2,407 which happens to be the lower end of the support from yesterday's daily bar.
Even though there are still two more trading days this week, the key will be to see if the weekly bar can close above 2,407.
The other key level will be 2,505. That is the midpoint of last week's weekly bar.
A close above 2,505 would be interpreted as bullish.
And naturally, another key for this market is to see a close above the lower band on the daily chart for the S & P 500.
In closing, I do need to mention that the daily bar closed yesterday at 100% of the bar. This puts the odds of violating yesterday's high before the low at an almost certainty.
Continue to monitor the levels as I mentioned above.
Here are the Key Levels for the Markets:
$VIX:
Major level: 43.75
Minor level: 40.63
Minor level: 34.38
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
The VIX closed at 30.24, down 5.83 on the day. This puts the VIX above its upper band on the daily chart, which is 28.49.
Monday, the VIX did close above the upper band on the daily chart. And yesterday's reversal was still above the upper band. The upper band is 29.20.
The VIX will need to close under the upper band for this move to continue higher.
28.13 should offer short term support for the VIX. And resistance is at 37.50.
SPX:
Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00 <
Minor level: 2,484.38
Minor level: 2,453.13 **
Major level: 2,437.50
Minor level: 2,421.88
Minor level: 2,390.63
Major level: 2,375.00
The S & P 500 managed to close above the minor 2,453.13 level. A close today above that level and the S & P 500 should test 2,500.
2,500 should still be resistance. And 2,437.50 should be minor support.
QQQ:
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 <
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 QQQ closed at 152.46. A close today above 151.56 would imply a move up to 156.25.
At this point, I don't see any rally going above the 162.50 level. It if can, it would tell us that something is changing.
The lower band is 146.64.
IWM:
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
Minor level: 129.69 **
Minor level: 126.56
Major level: 125.00
The IWM closed at 131.93. It closed up 6.05 on the day. Even with this move, the IWM is still trading under the lower band on the daily chart. That level is 134.49.
If the IWM can hold the 131.25 level, I would expect a move up to 135.
TLT:
Major level: 123.44
Minor level: 123.05
Minor level: 122.27
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
The TLT closed at 120.02, down 1.30 on the day. The TLT did hit the 120.31 objective.
The next level down is 118.75 and it should offer support.
The daily chart continues to move closer to an uptrend.
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 119.66. 119.53 is the key level on the downside.
The GLD did take out the midband on the daily chart but could not close above it. That level is 120.21.
XLE:
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
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 57.19. It was the fifth day trading under the lower band. the lower band is now 58.72.
A close today above 57.03 and the XLE should test 59.38.
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 close at 85.78 again. It did hit the midband and sold off.
And 86.67 is the midband on the daily chart.
Looking for the FXY to bounce around before heading lower.
AAPL:
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: 159.38
Minor level: 153.13 **
Major level: 150.00 <
Minor level: 146.88
Minor level: 140.63
Major level: 137.50
Like a lot of stocks, Apple had a strong bounce yesterday. It was up $10.34 on the day and closed at 157.17.
I am not to officially state the pullback is over, but it is getting close. We should know by the end of the week.
WATCH LIST:
Bullish Stocks: DOG, QID, LABD, PSQ, TZA
You know the market is in trouble when the trending stocks are all short ETFs.
Bearish Stocks: BKMG, GOOGL, BA, ROP, NFLX, NOC, LLL, MLM, STZ, GS, FDX, RTN, WEX, STMP, LGND, LRCX, FB, CB, LH
Be sure to check earnings release dates.
