==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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The sell off continues. Or should I say, the onslaught.
One thing I was taught many years ago by a market professional was that market reactions tend to emulate market moves.
In other words, when you have a large move, the pullback tends to be large.
And markets are far from rational. That is, they can rise a lot higher than you think they can.
The move in the S & P since December 2019 to the top in February lost likely far exceeded what most people felt it could.
The market bottomed at 2,346.58 back in December of 2019. And the High in February hit 3,393.52.
This was a move of 1,047 points or 45% in only 14 points.
Certainly most people did not feel this was rational.
And now the market is experiencing a sell-off to correct this move. The main difference now is that this is a health endemic that is creating the run for the exits. Or should I say the sprint to the exits?
In trying to put this sell-off into perspective, I try to identify where the selling could stop.
And at this point, we are approaching two levels that I feel the market could find a base.
The first is the midband on the daily chart, which is around 3,000.
With a sell-off from the upper band, the midband should be support the first time it is tested.
And at this point, the S & P is only about 100 points away from the midband.
The other level is around 3,081, which is only 20 points under the midband. How did I get this price level?
Very simply, this would be a two-level move off the top as measured by my resistance levels.
A two-level move would be a normal pullback in a bull market.
A three-level move, which would drop the market to around 2,925, and a three-level move would suggest the bull market has come to an end.
No one seems to mention this when I listen to the pundits, but the distance the market drops should tell us if that is true.
I did mention on John's webinar that I don't believe the selling is over.
And there are a few reasons for that.
The two most important reasons are based on the 60 minute chart.
The S & P is still trading under its lower band on its 60 minute chart.
Yesterday, it briefly got above the lower band, only to fail close under it.
This tells us that the market will retest the lower band after a bounce in the market.
The other fact about the 60 minute chart is that is has crossed into a downtrend. This also tells us to expect a sell-off after a rally.
The midband on the 60 minute is 3,298 and would be resistance on a rally.
The other fact at this point is that the bullish percent index keeps dropping. In fact, it dropped another 8.1% yesterday. After topping at 78.80, it closed at 47.60 yesterday. And this was in 5 days!
I have never seen this type of reaction. But, it shows you how real the scramble for the doors are.
This index is now very close to the lower band on the daily chart. That level is 44.14 and it is within 4 points of it.
As you know, price can drop under the lower band, but it would indicate that this index would be seriously oversold.
The final factor is the selling climaxes. As I mentioned the other day, the print was changed on Monday and the down to up volume read 14.39, which qualified it as a selling climax.
The market will need another one or two to convince me a bottom is in.
Back in August last year, there were three selling clinaxes before the market turned up.
I hope this helps you to understand what I am looking at during this confusion.
And I try to provide information that can help you. Listen to the fluff on CNBC if you want the BS.
For example, yesterday I said that resistance should be at 3,183.
As it turned out, yesterday's high was 3,182.51.
I would say to call the daily top within 50 cents on the day with a range of 73.52 points is pretty good.
You don't get that on CNBC.
Resistance from yesterday's daily bar should be in the 3,128 area. If this level is taken out, a move up to 3,145 is possible. And it should be resistance.
Pre open, the S & P is trading about 42 points lower. This would project to an open around 3,074 or about 7 points under the 3,081 level I mentioned above.
SQ is trading about $4.64 higher after reporting.
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 closed at 27.56, down 0.29 on the day. But, it still remains above its upper band on its daily and 60 minute charts.
The VIX will have to drop under the upper band on the 60 minute chart, which is 24.68 to have the market reverse and move higher.
Short term, the VIX is overbought and we should expect anoterh rally in the VIX afer it does drop inside the upper band.
Watch the 28.13 level today. If the VIX clears this level, it could go even higher.
I do need to mention that both the S & P and the VIX closed lower, which is a divergence and an indication that a bounce should be coming.
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 3,116.39. The S & P dropped under the major 3,125 level, and managed to close under it. It should now be resistance. And 3.164 should be resistance.
The next level is 3,085 and today's projected open should be about 11 points under it.
If the S & P cannot reclaim the 3,085 level, I would expet a drop down to 2,968.
3,150 is the lower band on the 60 minute and this is also a level the marekt needs to reclaim to head higher.
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 216.48. The QQQ would have to close above 216.43 today in order the bounce.
This is well above its midband on the daily chart, which is 194. And above the lower band on its 60 minute chart, which is 208.
224 should be resistance.
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 154.50. The IWM had its first close under 154.69. This now suggests that if the IWM closes under 154.69 today, it should drop to 150.
It also closed under the midband on this daily chart, which is 155.51.
This, of course, is quite bearish and suggests a drop to 140 is possible. 140 being the lower band.
The IWM is under its lower band on its 60 minute chart. The lower band is 158.
The 151 area could provide 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 150.25. The TLT will still need two closes above 150.78 to move up to 153.13.
The 152 area could offer technical resistance. And support is at 148.
Continues to spike on market fears. But, looks to be pulling back from its overbought condition.
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 153.97. Watch to see if the GLD can hold 153.91 today. If it can't, I would expect a short term pullback.
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 47.87. The XLE broke under the lower band on its daily chart. The lower band is 50.80.
Seriously oversold now. But, to bounce, it will need to reclaim 50.80.
Biased for a drop to 46.87 before any buying pressure comes in.
48.12 is technical support and the lower band on the 60 minute chart. Watch to see if this can hold. And with a break under it, it will have to close above this level to see any bounce in the XLE.
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 292.65. Apple managed to close 4.57 higher yesterday, which should have been an opportunity to short.
The lower band is 290.82 on the 60 minute chart and Apple is under it.
The 276 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
