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, the market moved strongly higher, but the news for today is the US air strike in Iran, which has the market selling off strongly before the open.
Interesting how a lot of the defense stocks had made strong moves yesterday.
For example, RTN was up over 2% and LMT was up $9.99.
Did someone know something and position themselves to capitalize on it? I would not dare suggest that... wink wink.
But, both stocks are up sharply pre open.
The question is, could we as average market participants know something like this was coming?
No, of course not. But, the fact of the matter is that I have been recently writing about what the impetus could be to drive a sell-off and profit-taking in the market.
The only thing we know is that the sentiment indicators have been all overbought ... and have been for a while.
The other thing we know is that last year was strongly bullish ... and the S & P is above the upper band on its monthly chart.
The key is will this pullback hold above the upper band?
The upper band is now 3,084. And pre open, the S & P is trading about 27 points lower. This would project to an open around 3,230 or about 5 points below yesterday's low.
Watch yesterday's low of 3,230 on a rally. The next level on a pullback to watch would be yesterday's midpoint, which is 3,246.
The level to watch on the downside is 3,212. That is the last pivot low on the 60 minute chart. A violation would suggest the market would head even lower.
The next support area for the S & P under 3,212 is around 3,206.
Watch the support area from last week's weekly price bar in the 3,233 to 3,234 area. The market should open just under it, so it should now be resistance on a rally.
Pre open, the S & P is trading about 31 points lower now.
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 12.47. The VIX dropped almost 10% yesterday, closing just under the major 12.50 level.
With the pre-open sell-off, the VIX should no doubt spike at the open.
Watch the 15.63 level. If it fails here, it may be time to fade this sell-off. But, the VIX could go as high as 18.75 without affecting the bull trend.
Watch the minor levels for the VIX as well today.
SPX:
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
Minor level: 2,773.45
The S & P closed at 3,257.85. Watch the minor 3,242.15 level on the downside. The market should open under it and I would expect it to be resistance on a rally.
Two closes under 3,242 and the S & P should drop to 3,125.
Major support should come in at 3,125. And watch the 3,203 level. It should offer minor support.
Technical support is around 3,230. A break under it and the market should head lower.
QQQ:
Major level: 218.78
Minor level: 218.00
Minor level: 216.43
Major level: 215.65 Hit
Minor level: 214.87 **
Minor level: 213.30
Major level: 212.50
Minor level: 211.74
Minor level: 210.17
Major level: 209.39
Minor level: 208.61
Minor level: 207.04
Major level: 206.25
Minor level: 205.48
Minor level: 203.91
Major level: 203.13
The QQQ closed at 216.16. Watch the 215.65 level which was taken out yesterday. A break under it and I would expect the QQQ to test 214.87.
212.50 should now be support.
And the 213 area should offer technical support. Watch this level today.
IWM:
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
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
The IWM closed at 165.78. At this point, 167.19 should be resistance. And if the IWM closes under this level today, a drop to 162 should be the objective.
The minor 164.06 level should offer support. If the IWM cannot clear 167.19 it should continue down.
164 should be technical support.
Short term charts still remain bullish.
TLT:
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 HIT
Minor level: 135.84
Minor level: 132.81
Major level: 131.25
The TLT closed at 137.01. The TLT should move higher based on the pre market sell off.
An open above 137.50 would suggest it would be support. And watch to see if it can clear 140.
And technical resistance is at 138.
GLD:
Major level: 143.75 Hit
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: 136.72
Minor level: 135.16
Major level: 134.38
The GLD closed at 143.95. The GLD hit the 143.75 objective.
The GLD is overbought short term, but expect a spike higher based in the news.
140.63 should be support.
137.50 should be strong support. So if the GLD does break under it, I would expect it to head lower.
The key level is 134.38 on the downside. If the GLD has two closes under this level, it could drop to 125.
Technical resistance is around 140. Short term, the GLD is overbought.
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
Minor level: 55.86
Minor level: 55.08
Major level: 54.69
The XLE closed at 60.58. The XLE should also continue higher at the open.
Watch for support at the 60.16 level.
With the XLE above the midband, which is now 58.90, this level should be support.
The XLE has still not crossed into an uptrend on the daily chart, but it is inching closer. If the XLE can cross into an uptrend and start to move above the midband, it could have a strong move higher.
AAPL:
Major level: 300.00 Hit
Minor level: 296.88
Minor level: 290.63 **
Major level: 287.50 HIT
Minor level: 284.38
Minor level: 278.13
Major level: 275.00
Minor level: 271.88
Minor level: 265.63
Major level: 262.50
Apple closed at 300.35. Apple hit the 300 objective.
Watch the 297.60 level on the downside. It should be support, so if Apple breaks under it, expect a further sell-off.
287.50 should offer support. And minor support is at 290.63.
And Apple is up against the upper band on the daily chart. That level is 298.93.
The 290 area should offer technical support.
WATCH LIST:
Bullish Stocks: TSLA, GOOGL, SHOP< HUM, NOC, ADBE, SPY, DPZ, BDX, INTU, NVDA, BABA, FB, MCD, KLAC, URI, ZBH, JPM, IBM, RCL
Bearish Stocks: BA, FFIV, CHKP, ALXN, SAGE, SQ, PLCE, TXRH, CAKE
Be sure to check earnings release dates.