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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Yesterday closed out the monthly price bar for the S & P 500. And once again, it was a bullish bar.
I brought up yesterday, the fact that the market would have to close under 2,777.62 for any bearish sentiment to set it.
And that did not happen. The price bar for the month of January ended up as follows:
Open 2,683.73
High 2,872.87
Low 2,682.36
Close 2,823.81
The range for the month was 191 points and the bar closed at 74.2% of the range.
I use this as an estimate to determine which end of the price should be violated first. And with a close percentage of 74.2%, it mean the odds are about 74% that the high will be violated before the low.
And based on the monthly price bar, support should be at the midpoint, which is 2,778 and the balance point, which is 2,754. The 2,754 level should be rather strong support because it is also the 61.8% retracement level of the bar.
The other thing I need to point out about the January price bar is that it expanded and would be considered a long range bar. Compared to the ranges for November and December, which were 52 and 68 points respectively, you can see how much the January bar expanded.
Also, if you compare it the monthly average true range, which is 95.77 points. So, January's range was almost double the average true range.
So, what does all this information tell us and how do interpret moving forward?
First off, there is no question the market is at lofty levels. We know that by just measuring against the extreme bollonger bands. But, that does not tell us that it is time to short.
In fact, the traders that got hurt the most back in the tech bubble in the 2000's, where the one that kept shorting all the way up. We may think the market is overbought, but the market doesn't know that.
The second thing this tells us that we can trade around the support levels of the longer term bars. At least we can identify where the key levels should be.
Yesterday is an example of that.
In fact, I mentioned that the S & P 500 was under the weekly midpoint, which was 2,840. One concept I keep harping on is that when support is violated it now becomes resistance, and vice versa.
Well, yesterday the S & P 50 gapped up and opened at 2,832.41, which was under the 2,840 level.
The market continued to rally to a high of 2,839.26 or about 75 cents under the now resistance level.
From that point, the market proceeded to drop all day to hit a low of 2,813.04.
So, by just knowing the 2,840 and log behind shorting at that point, you could have picked up about 26 points.
The key today is that the S & P 500 is trading just under the upper band on the daily chart, which is 2,832.82. If the market cannot get back above it, it should tell us where the next move should be.
I do want to mention that there are some major earning announcement this evening. After the close, we will hear from AMZN, GOOGL, and Apple.
Here are the Key Levels for the Markets:
$VIX:
Major level: 15.63
Minor level: 15.24
Minor level: 14.45 **
Major level: 14.06
Minor level: 13.67
Minor level: 12.89
Major level: 12.50
Minor level: 12.11
Minor level: 11.33
Major level: 10.94
Minor level: 10.55
Minor level: 10.16
Major level: 9.38
The VIX closed at 13.70, closing under the major 14.06 level.
The VIX closed under the upper band on the daily chart. That level is 14.66. Watch to see on a retest if it can clear this level. If it can't, it should drop.
12.50 should offer support. And resistance should be at 14.45.
$SPX:
Major level: 2,890.60 <
Minor level: 2,871.08
Minor level: 2,832.03 **
Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
Major level: 2,734.40
Minor level: 2,724.23
Minor level: 2,705.07
Major level: 2,695.30
Minor level: 2,685.55
Watch the major 2,812.50 level. A break under this level and it should become resistance.
2,773.40 should offer support.
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 169.40, 65 cents above the major 168.75 level.
168.75 should still offer support.
Like the S & P 500, short term charts are bullish.
IWM:
Major level: 162.50
Minor level: 161.72
Minor level: 160.16
Major level: 159.38
Minor level: 158.60 **
Minor level: 157.03
Major level: 156.25 <
Minor level: 155.47
Minor level: 153.91
Major level: 153.13
Minor level: 152.35
The IWM closed at 156.36. The IWM is testing the 156.25 level. You should the implication if that level is violated.
Major support should be at 153.13.
TLT:
Major level: 128.13
Minor level: 127.35
Minor level: 125.78
Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44
Minor level: 123.05
Minor level: 122.27 **
Major level: 121.88
The TLT closed at 122.73. This implies that if the TLT closes above 122.27 today, it should test 123.44.
Getting the bounce off the 121.88 level.
GLD:
Major level: 131.25
Minor level: 130.47
Minor level: 128.91
Major level: 128.13 <
Minor level: 127.35 **
Minor level: 125.78
Major level: 125.00
Minor level: 124.22
Minor level: 122.66
The GLD closed at 127.65. A test of 128.13 is the next move.
Watch the 127.35 level. 126.56 is minor support.
XLE:
Major level: 81.25
Minor level: 80.47
Minor level: 78.91
Major level: 78.13 <
Minor level: 77.74 **
Minor level: 76.95
Major level: 76.56
Minor level: 76.17
Minor level: 75.39
Major level: 75.00
Minor level: 74.61
The XLE closed at 74.85. The upper band is 76.80. So, watch this level on a rally.
The 75 level should offer support. If the XLE can not get back above 75, look for a drop to 68.
FXY:
Major level: 89.06
Minor level: 88.87
Minor level: 88.48
Major level: 88.28 <
Minor level: 88.09 **
Minor level: 87.70
Major level: 87.50
Minor level: 87.31
Minor level: 86.92
Major level: 86.72
Minor level: 86.53
The FXY closed at 87.88, just under the major 88.28 level, again. A close today under 88.09 and the FXY should test 87.50.
A pullback is an opportunity to buy.
AAPL:
Major level: 178.13
Minor level: 177.35
Minor level: 175.78
Major level: 175.00
Minor level: 174.22
Minor level: 172.66
Major level: 171.88
Minor level: 171.10
Minor level: 169.53
Major level: 168.75
Minor level: 167.97
Minor level: 166.41 **
Major level: 165.63
Apple closed at 167.43. The 166.41 is the key level today. If ti closed above this level, it should head up to 168.75. A failure and it could drop to 165 again.
WATCH LIST:
Bullish Stocks: AMZN, GOOGL, LMT, BA, SPY, GWW, ALGN, ORLY, NLFX, BDX, LLL, FLT, RTN, DE, VRTX, PANW, CME
Bearish Stocks: SLG, ALK, CHD, SAVE, HA, TLK,
Be sure to check earnings release dates.
