==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.
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Yesterday completed the largest two-day drop on the history of the markets. At least, that is what I heard on CNBC, so I will not question that fact.
But here are the facts.
The S & P 500 has dropped 257.94 points since last Wednesday. So, in four days, the S & P gave back 8.2%.
And as I said yesterday, I did not feel the selling was over. And I still don't.
This is primarily because no one really seems to have a handle on the coronavirus.
It could turn out to be contained, but at this time, all news has been bad. And seems to be getting worse.
The only thing I can do is to share the technical condition of the market with you and what I see in the charts.
And that is what I will do and continue to do.
I mentioned yesterday that I felt more selling was coming because Monday did not qualify as a selling climax. Actually, that was not true. The print was changed and the reading for Monday was actually 14.39.
So, it did qualify as a selling climax, which means this was the first one in the sell off.
One climax can turn a market, but with this intense selling pressure, I suspect we will need multiple climaxes before we see a turn.
Short term, the markets are oversold. We know this because the S & P is trading under its lower band on its 60 minute chart. In fact, the DOW is as well. The QQQ is not, once again demonstrating that it is the strongest market.
As you know, the extreme bollinger bands measure extreme market moves.
And they allow us to project what the market action should do. When a lower band is breached, there is a very high probability that the lower band will be retested again. That is once price moves back inside the lower band.
The S & P closed at 3,128.21 yesterday and the lower band is 3,168.47. So, the S & P needs a 40-point bounce just to move back inside the bands.
If the market can recoup the lower band, the objective should be to the midband, which is 3,300. So, this would be a bounce of about 200 points from yesterday's low.
Just like the S & P trading under its lower band on the 60 monute chart, the VIX, which trades opposite the S & P is well above its upper band.
So, like the S & P, if the VIX drops under the upper band, we would expect a retest of the upper band.
The VIX closed out at 27.85 yesterday and its upper band is 22.87. So, the VIX would have to drop 5 points to move back inside the bands.
But, the key here is the VIX should help us time the retest of the lower band for the S & P 500. How, you ask? We want to see the VIX move lower and find support and turn up. That should be the signal.
In looking at the daily price charts, the major factor is the midband.
I mentioned the prior pivot low of 3,214.68, which has been breached. This, of course, is bearish.
After the S & P stalled at the upper band, the target and support level should be the midband, which is 3,005. It is usually support the first time it is tested. A break of the midband would tell us this market is going even lower.
And yesterday's close put the S & P within 125 points of the midband.
A side note here is that the DOW is litterally sitting right on its midband. The midband for the DOW is 26,988.54 and yesterday it closed at 27,081.36.
This, of course, is a key factor to monitor today.
Finally, I do want to mention that the NASD Composite and the QQQ are both well above their midbands. This is expected because both these markets took out their upper bands on their daily charts, while the S & P & the DOW did not.
Yesterday's range was a massive 128.22 points. This was almost 3 times the daily average true range.
And it closed at 7% of the daily bar, which suggests that the low will be violated before the high.
And with a massive long range candle, resistance should be at 3,183.
Pre open, the S & P is trading about 6 points higher. This would put the open right around the 3,134. Yesterday's low was 3,118.77. So, the open should be around 15 points above the low.
CRM reported and is down about $4.
BKNG reports today after the close and SQ also reports today.
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 continued to move higher. It closed the day out at 27.85, up 2.82 on the day.
The VIX is above its upper band on both its 60 minute chart and the its daily chart. This does demonstrate how overbought the VIX is.
Watch the 25.78 level today. A close today above it and the VIX should test 28.13.
30.77 should offer technical resistance. And the 21 area technical support.
The VIX will have to drop to see a move up in the S & P.
S & P 500:
Major level: 3,427.40
Minor level: 3,398.35
Minor level: 3,320.25
Major level: 3,281.20
Minor level: 3,242.15
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
The S & P closed at 3,128.21. The S & P dropped under the major 3,125 level, but managed to close above it.
The S & P has dropped almost 2 levels off the top. An actual two levels drop would see the market go to 3,081, which is around the minor level under 3,125.
Watch the 3,164 level on the upside and 3,085.95 on the downside.
Technical support should be at 3,115.
QQQ:
Major level: 228.13
Minor level: 227.35
Minor level: 225.78
Major level: 225.00
Minor level: 224.22
Minor level: 222.69
Major level: 221.91
Minor level: 221.13
Minor level: 219.56
Major level: 218.75
Minor level: 217.97
Minor level: 216.43
Major level: 215.65 <
Minor level: 214.87 **
The QQQ closed at 215.37. This put the QQQ under the major 215.65 level.
Watch the minor 214.87 level on the downside and 216.43 on the upside.
And technical support should be around 212.
IWM:
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 <
Minor level: 154.69
Minor level: 151.56
Major level: 150.00
The IWM closed at 156.31. Watch the 154.69 level on the downside and 157.81 on the upside.
The IWM is under its lower band on its 60 minute chart. The lower band is 160.
156 is minor technical support.
TLT:
Major level: 153.13
Minor level: 152.35
Minor level: 150.78 **
Major level: 150.00 <
Minor level: 149.22
Minor level: 147.66
Major level: 146.88
Minor level: 146.10
Minor level: 144.53
Major level: 143.75
Minor level: 142.97
Minor level: 141.41
Major level: 140.63
The TLT closed at 151.05. The next minor level is 150.78. A close today above 150.78 and the TLT should move up to 153.13.
The 152 area could offer technical resistance. And support is at 149.
Continues to spike on market fears.
GLD:
Major level: 156.25
Minor level: 155.47
Minor level: 153.91
Major level: 153.13 **
Minor level: 152.35
Minor level: 150.78
Major level: 150.00
Minor level: 149.22
Minor level: 147.67
Major level: 146.89
Minor level: 146.11
Minor level: 144.54
Major level: 143.75
The GLD closed at 153.30. The GLD broke and dropped 2.79. Watch the 153.13. A break under it and the GLD should head lower.
155 is resitance on the upside. And minor support is 153. A break under 153 and the GLD should head lower.
Pulling back from its short term overbought condition.
XLE:
Major level: 59.38
Minor level: 58.60
Minor level: 57.03
Major level: 56.25
Minor level: 55.47
Minor level: 53.90
Major level: 53.12
Minor level: 52.34
Minor level: 50.78
Major level: 50.00 <
Minor level: 49.22 **
Minor level: 47.65
Major level: 46.87
The XLE closed at 49.36. The XLE broke under the lower band on its daily chart. The lower band is 51.03.
The XLE is now oversold and will have to reclaim the lower band to move higher.
48.89 is technical support and the lower band on the 60 minute chart. Watch to see if this can hold.
AAPL:
Major level: 337.50
Minor level: 334.38
Minor level: 328.13
Major level: 325.00
Minor level: 321.88
Minor level: 315.63
Major level: 312.50
Minor level: 309.38
Minor level: 303.13
Major level: 300.00
Minor level: 296.88
Minor level: 290.63
Major level: 287.50 <
Minor level: 284.38
Apple closed at 288.08. Apple hit a low of 286.13, dropping under the major 287.50 level.
The lower band is 291.84 on the 60 minute chart and Apple is under it.
The 284 area should offer technical support.
WATCH LIST:
Bullish Stocks: CMG, TSLA, DPZ, MA, COST, NVDAm DXCM, LULU, VRTX, HD, V, CRM, STMP, DG, AXP, ROST, DGX
Bearish Stocks: VRSN, EEFT, W SPR, MNRO, XOM, LNG, NTAP, CREE, CSCO, CCL, R
