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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As we begin the last trading week of January, the market pulled back. There were a few negative announcements yesterday. The first was the earnings from CAT.
CAT disappointed and was down over 9% off their earnings. And NVDA had a negative pre announcement that drove the stock down almost 14%.
The end result was that the S & P 500 sold off 20.91 points. This actually wasn't as bad as it appeared because the market was down 40.70 points at the low of the day.
With the bearish gap of 19.79 points, the close ended up almost recapturing the entire intra day range by the close.
The intra day range was only 20.91 points. The average true range is now 43.16, so the intra day range was less than one half the average.
And for the day, the S & P 500 managed to close at 95% of the daily bar. This is about as bullish as a day can be on a bearish day.
The close percentage puts the odds of violating yesterday's high before the low.
The key intra day levels to watch for today are 2,634 and the close of 2,644.
Also, you want to monitor the high and the low which were 2,644.97 and 2,624.06, respectively.
Yesterday's price action seemed to mirror Friday's price action, except in reverse.
Friday we got the bullish gap and yesterday we got the bearish gap.
Today should tell us if the market will head up to test the midband or if this is the beginning of a pullback.
As I have been saying, I am biased for the former over the latter.
A move up to the midband would bring the S & P 500 up to around 2,734.
We are within 100 points of that target.
This afternoon we will get earnings from Apple. This should be a closely watched report.
Tomorrow is our webinar. If you have a question or issue you would like me to address for tomorrow, email me directly at davismdt@gmail.com and I will try and add your question to the agenda.
The weekly support levels should still be valid. The midpoint from last week's weekly price bar is 2,642.62 and the S & P 500 closed just above it yesterday.
Watch to see how price reacts at this level.
Continue to monitor the levels as I mentioned above.
Here are the Key Levels for the Markets:
$VIX:
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 18.87. For the day, it was up 1.45 points. But the VIX got as high as 20.42 before closing lower.
For the VIX to head lower, it will have to break under 18.75.
19.53 should be resistance and support is at 17.97.
Minor technical support is at 19.07. If the VIX breaks under 19.07, I would expect it to head lower.
SPX:
Major level: 2,734.40 <
Minor level: 2,714.88
Minor level: 2,675.83 **
Major level: 2,656.30 <
Minor level: 2,636.75 **
Minor level: 2,597.65
Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00
The S & P 500 did manage to move below the 2,636.75 support level but did recover it by the end of the day.
This level should still offer support.
On the upside, the S & P 500 needs to clear 2,648.90 to move higher.
Pre open, the S & P 500 is trading modestly higher.
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
Minor level: 154.69
The QQQ closed at 163.11. The QQQ dropped under 162.50 but managed to close above it.
162.50 should be support. And minor support is at 162.89.
Like the S & P 500, the 60 minute chart for the QQQ is in an uptrend. Technical support should be at 159.33.
If the QQQ can hold 162.50, I would expect it to head higher.
IWM:
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
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
The IWM closed at 146.55. The objective for the IWM is still to 150.
The IWM will need to clear 147.66 to move up to 150. Minor support is at 145.70.
And 146 should be technical support for the IWM.
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: 118.14
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
The TLT closed at 120.41. To move lower, the S & P 500 will need two closes under 119.92.
At this point, 120.31 is still minor support. So, a break under this level should indicate the TLT will head lower.
The 60 minute chart has crossed into a downtrend which implies further movement to the downside.
GLD:
Major level: 125.00 <
Minor level: 124.22
Minor level: 122.66 **
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
The GLD closed at 123.29. The GLD should test 125.
122.66 should be minor support.
In the short term, the GLD is overbought. A pullback is possible. But with the 60 minute chart in an uptrend, I would expect a rally if there is a pullback.
XLE:
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
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
The XLE closed at 62.30. The XLE is struggling to clear the 62.50 level.
To move higher, the XLE needs two closes above 63.28.
62.50 should be support. And minor support is at 61.91.
Biased for a move higher.
FXY:
Major level: 89.84
Minor level: 89.65
Minor level: 89.26
Major level: 89.06
Minor level: 88.87
Minor level: 88.48 **
Major level: 88.28
Major level: 87.50 <
Major level: 86.72
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
The FXY closed at 87.28. Deciding where the next minor move should go.
I am biased to the downside but the FXY will need to take out the midband on the daily chart to head lower.
That level is 86.82 and the FXY bounced off it yesterday.
Wait for price confirmation in either direction. A break under the midband would suggest lower prices to follow. And if the midband holds, I would expect another upleg.
87.21 is minor support.
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
Apple closed yesterday at 156.30. 155.47 is minor support. And if Apple can clear 157, I would expect it to head higher.
Best to stand aside at the moment and wait for earnings this afternoon.
WATCH LIST:
Bullish Stocks: CMG, REGN, AVGO, WDAY, EW, VRSN, VMW, VRSK, XLNX, CHKP, WIX, YUM, CNI, NKE, SQ, WELL, ZEN
Bearish Stocks: FFIV, WB, DOX, QCOM, SIG, BITA
Be sure to check earnings release dates.