While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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's price action diverged. Diverged in the sense that the close percentage on Wednesday was 90% of the daily price bar and we would have expected a violation of the high before the low.
And the exact opposite happened.
But, we were warned.
How you ask?
On Wednesday, the day that the daily price bar closed at 90%, it also diverged in that both the S & P 500 and the VIX closed to the upside.
And the VIX was back to long term 12.50 support level.
All of this is a warning that perhaps intiating new longs is not a great idea at the moment.
But, with both the short term 30 minute and 60 minute charts in uptrends, I do expect anotehr rally after this sell off.
The VIX turning to the downside would be the clue to get back into the markets.
The resistance level from yesterday's daily price is in the 2,805 to 2,807 area.
When we scope out and look at the weekly price bar through yesterday, we can see that the high for the week is 2,816.76 and the low is 2,789.24.
And that yesterday's close was virually equal to the open.
The range so far is onlt 27.52 points. This is well under the weekly average true range, which is 60.95 points.
The midpoint is 2,803.
And yesterday's close was just above it.
Watch this level today. To avoid a pulback, the S & P 500 needs to close above the midpoint.
Pre open, the S & P 500 is trading about 5 points lower. This projects an open around 2,800. Watch to see if the S & P 500 can regain the 2,803 level. If it can, I would expect it to act as support.
Watch the support levels I mentioned above.
Continue to monitor the longer term levels for the market.
Here are the Key Levels for the Markets:
$VIX:
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00
Minor level: 23.44
Minor level: 20.31
Major level: 18.75 <
Minor level: 17.19
Minor level: 14.06 **
Major level: 12.50 <
Minor level: 10.94
The VIX closed at 12.88. Yesterday's high was 13.09. This was 19 cents under the minor 13.28 level.
Watch for resistance at 13.28 on the upside. If the VIX reverses off of 13.28 and begins to head down, look for the markets to push higher.
A violation of 13.28 voids that scenario.
SPX:
Major level: 2,841.80
Minor level: 2,829.60
Minor level: 2,805.20 **
Major level: 2,793.00 <
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10
Minor level: 2,731.90
Minor level: 2,707.50
Major level: 2,695.30
Minor support should be at 2,801.50. If that level is violated, look for support at 2,795.40.
If 2,795.40 is violated, the S & P 500 could drop down to 2,777.
On the upside, look at the 2,807.60 level.
QQQ:
Major level: 187.50
Minor level: 185.94
Minor level: 182.81
Major level: 181.25 <
Minor level: 179.69
Minor level: 176.56
Major level: 175.00
Minor level: 173.44
Minor level: 170.31
Major level: 168.75
The QQQ closed at 179.03. The 181.25 level is still the objective, but resistance is at 180.47.
Like the S & P 500, both short term charts are still bullish.
178.91 is minor support. And 178.13 should now be minor support.
IWM:
Major level: 171.88
Minor level: 171.10
Minor level: 169.53 **
Major level: 168.75 <<
Minor level: 167.97 **
Minor level: 166.41
Major level: 165.63
Minor level: 164.85
Minor level: 163.28
Major level: 162.50
The IWM closed at 169.17. 169.53 is a minor resistance level. If the IWM clears 169.53, it should head higher.
Major support is at 168.75. And minor support is at 168.36.
Both short term charts are on uptrends, so look to buy on support.
TLT:
Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44 <
Minor level: 121.49
Minor level: 120.70 **
Major level: 120.31
Minor level: 119.92
Minor level: 119.14
Major level: 118.75
The TLT closed at 122.26. 121.97 is minor support. On the upside, 122.46 is minor resistance.
The TLT is also just above the midband, which is 121.26. This level should be support until it is violated.
GLD:
Major level: 120.31
Minor level: 119.92
Minor level: 119.14
Major level: 118.75
Minor level: 118.36
Minor level: 117.58
Major level: 117.19
Minor level: 116.80
Minor level: 116.02
Major level: 115.63 **
The GLD closed at 115.81. The GLD broke under the lower band on the daily chart, which is now 115.74.
114.84 should offer support.
At the point where an uneven straddle of strangle makes sense to trade the bounce that should be coming.
XLE:
Major level: 78.13 <
Minor level: 77.35
Minor level: 75.78 **
Major level: 75.00
Minor level: 74.22
Minor level: 72.66
Major level: 71.88
Minor level: 71.10
Minor level: 69.53
Major level: 68.75
The XLE closed at 75.15, 15 cents above the major 75.00 support level.
The XLE has now consolidated between the major 75 and 78.13 levels for about 3 months.
Watch to see if the XLE can hold the 75 level. 74.80 is a minor support level.
FXY:
Major level: 86.72
Minor level: 86.53
Minor level: 86.14
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
Minor level: 84.58
Major level: 84.38 <<
The FXY closed at 85.05. The low for the day was 84.63 or 25 cents above the major 84.38 line.
The FXY is oversold. Consider an unequal straddle or strangle with a bullish bias. Email me if you don't understand the strategy.
85.16 should be minor resistance.
AAPL:
Major level: 200.00
Minor level: 198.44
Minor level: 195.31
Major level: 193.75 <
Minor level: 192.19 **
Minor level: 189.06
Major level: 187.50
Minor level: 186.72
Minor level: 185.16
Major level: 184.38
Apple closed at 191.88. 191.02 should be minor support. If that can't hold, look for 190.63 to hold.
The objective for Apple is to the 193.75 level.
The 60 minute chart is very close to crossing into an uptrend.
WATCH LIST:
Bullish Stocks: AMZN, GOOGL, HUN, ILMN, SPY, BIDU, BDX, FLT, PANW, FB, MA, SAGE, AMGN, ACN, CXO, WDAY, LOPE, DGX
Bearish Stocks: AVGO, MCD, AMP, KSU, MAN, BG, TSN, AMAT, MET
Be sure to check earnings release dates.