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.
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
RRC Long at $11.85
Total Premium Collected $0.70
RRC Long at $9.20
RIG Long at $8.81
Premium Collected - $1.45
FEYE Long at $17.18
Total Premium Collected $1.06
X Long at $11.33
DOCU Long Feb $75 Call @ $2.45
DOCU Short Feb $80 Call @ $0.70
UNIT Long at $6.78
UNIT Short Feb 21st Call @ $.30
................................................................................
Yesterday, I suggested a covered call trade on UNIT. In the alert, I mentioned that the strike should be expiring this Friday. The expiration is actually the February monthly call, which expires February 21.
Sorry for any confusion.
Yesterday saw the continuation of the selling that started on Friday. The market dropped 51.84 points yesterday on the virus fears out of China.
The intraday range was only 24.35 points due to the bear gap open of 48 points.
The daily price bar actually formed a doji. This is where the close is approximately the open.
The market opened at 3,247.16 and closed at 3,243.63.
So, this now suggests that the key levels for today will be yesterday's high of 3,258.85 and the low of 3,234.50.
If either level is violated, the market should continue in that direction.
And the close is also an important support or resistance level. So, watch how the market reacts around the close.
Pre open, the S & P is trading about 21 points higher.
This suggests an open around 3,264 or about 5 points above yesterday's high.
So, watch the high of 3,258 and if that does not hold, watch the close, which was 3,243.63.
I do find it interesting that all our sentiment indicators have been overbought ... have been for a while now. As you know, these indicators are not perfect in picking the exact top. They warn us that a top could be forming.
The other factor, which I have mentioned on multiple occasions, is the VIX dropping down to all-time lows.
So, we had been looking for something that could trigger a reversal. And this time around it just happens that the reason was not a direct ecomonic issue.
But, warning signs have been there, the market needed a trigger to see profit-taking set in.
I mentioned yesterday that the last downswing was 84 points.
The move from Friday's high to yesterday's low had exceeded that range. The downswing measured almost 99 points or 15 points more than the last downswing.
So, the question now is what would signal that yesterday's low is a short term bottom?
The first factor of course, is that today's low holds as support. The second factor would be if the VIX closes under 18.75 today. As I said yesterday, a move up to 18.75 in the VIX would be a normal move. A move above 18.75 would signify more selling in the market.
Yesterday's open put the S & P below the lower band on the 10 minute chart.
And the market did move back inside the bands and retested the lower band again late in the day. The lower band is 3,240. And at this point, I would expect support at that level.
The potential resistance levels on a bounce would be at the midpont of the gap, which is 3,270. The next level would be the gap, which is 3,290.
If the market takes out these levels, the next logical move would be up to the midband, which is 3,308.
This afternoon, we get earnings from Apple. And Wednesday morning, we hear from Boeing.
And Wednesday afternoon, we get earnings from a number of tech heavyweights, including FB, MSFT, PYPL and TSLA.
The week closed out with AMZN reporting Thursday afternoon.
Tomorrow at 2:00, we also get the FOMC decision on interest rates.
Here are the Key Levels for the Markets:
$VIX:
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 <
Minor level: 14.85 **
Minor level: 13.28
Major level: 12.50
Minor level: 11.72
Minor level: 10.16
Major level: 9.38
The VIX closed Friday at 18.23. The VIX did manage to close above the major 18.75 level, and failed to close above it.
Watch the 17.97 level today. If the VIX has two closes under 17.97, it should drop to 15.63.
And the 18.75 level should be resistance until it is violated.
The VIX is overbought in the short term. Watch the technical level of 16.80.
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
Minor level: 2,929.73
Minor level: 2,851.58
Major level: 2,812.50
The S & P closed at 3,243.63. Watch the minor 3,242.15 level today. If the S & P can close above it, I would expect a move back up to 3,281.
Support should be at the minor 3,242.15 level. Watch to see if this level holds. If it can't, the S & P should head lower.
Technical support is around 3,240. And watch the gap levels I mentioned above.
QQQ:
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: 218.00 **
Minor level: 216.43
Major level: 215.65
Minor level: 214.87
Minor level: 213.30
Major level: 212.50
The QQQ closed at 218.10. 218 should be support. And watch to see if the QQQ can regain the major 218.75 level.
218 is also a technical support level.
The upper band is now 224.07 and should now be resistance.
Because the QQQ took out the upper band on its daily chart, a retest of it would not be out of the question.
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 163.51. The IWM hit the major 162.50 level, with a low of 162.42.
The upper band is 169.12 and should now be resistance.
The IWM will have to regain 164.06 to move higher. Technical support is around 162.
TLT:
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
Minor level: 139.85
Minor level: 138.28
Major level: 137.50
Minor level: 135.84
The TLT closed at 144.29. The TLT took out the 143.75 objective.
At this point, it will need two closes above 144.53 to head higher. But, 144.53 should be resistance until it is violated.
The TLT is overbought short term. Watch the 143 area.
GLD:
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
Minor level: 142.97
Minor level: 141.41
Major level: 140.63
Minor level: 139.85
Minor level: 138.28
Major level: 137.50
The GLD closed at 148.99. The GLD should test 150, and was within 70 cents of it yesterday.
Watch the 149.22 level on the downside. A break under it and the GLD should head lower.
Like the TLT, it is overbought in the short term.
XLE:
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 Hit
Minor level: 55.86 **
Minor level: 55.08
Major level: 54.69
The XLE closed at 55.05. If the XLE cannot hold 55.08, I would expect further selling pressure. But, like the S & P, the XLE is oversold in the short term.
Technical support is at 55.16.
The midband, which is 59, should now be resistance.
AAPL:
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 308.95. Apple will need to recoup the 309.38 level to move higher. If it can't, it should drop.
They do report today, so I do not suggest a trade ahead of earnings.
The 308 area should offer technical support.
WATCH LIST:
Bullish Stocks: GOOGL, TSLA, SHOP, LMT, ADBE, MA, FLT, AAPL, COST, LRCX, RNG, ADSK, V, GD, DECK, KLAC, HSY
Bearish Stocks: REGN, BA, ALGN, AAP, FFIV, CVX, XOM, CMA, QURE, FSLR, RAMP, HLF, CLB
