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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ET Short March 13th - $12 call @ $0.35
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ET Long at $7.50
ET Short March 20th - $8 Call @ $0.60
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The worldwide coronavirus which has now been labeled a pandemic, and has and will continue to put the financial markets under tremendous stress.
And as more bans go into effect, further industries will be financially impacted.
Quite frankly, these are unprecedented times. And from a technical aspect, I can only share where extreme market levels are.
For example, yesterday qualified as another selling climax. The down to up volume registered 18.91.
Yesterday was the sixth selling climax in this sell-off.
Usually, one selling climax can turn the market. I have never seen sixth selling climaxes. And this is doing nothing to turn the markets.
As a point of reference, before the market bottomed back in 2018, there were two selling climaxes. And the market turned.
Now, we have had sixth in this sell-off and the markets are showing no sign of bottoming.
The other measurements I use are the extreme bollinger bands. These are the bands set to a 253-day setting with a 2.576 standard deviation.
I use these settings because 99.9% of all price action should be contained inside the bands. When the upper or lower band is breached, it indicates an extreme market condition.
And it sets up various price expectations. For example, if the lower band is breached, I always expect a retest of the lower band after the price moves back inside the bands.
The DOW is already under its lower band on its daily chart. The lower band for the DOW is 23,997 and yesterday, the DOW closed at 23,553.22. So, it is already about 400 points below the lower band.
And pre open, the DOW is trading about 1,200 points lower.
This would put the DOW about 1,600 points under the lower band.
As a point of reference, the lower band for the S & P 500 is 2,605. And this has been one of the price objectives I have mentioned in prior updates.
Yesterday, the S & P closed at 2,741.38, or about 140 above it.
And pre open, the S & P is trading about 135 points lower. So, the S & P should be at the lower band today.
This also means that the S & P, like the DOW, has run from the upper band to the lower band in about a month.
This is an unprecended move.
The market can trade under the lower band. The XLE is an example of a market doing just that.
The XLE breached the lower band on its daily chart on February 24th, when the lower band was 51.50.
Yesterday, it closed at 33.67 and is set to open even lower this morning.
This is an example of an extreme move.
The QQQ just closed under the midband on its daily chart.
The midband is 195.50 and yesterday, the QQQ closed at 195.22.
The lower band is 156. So, this shows you have far the QQQ could drop if it runs to the lower band.
To give you an idea of how oversold most stocks are, I ran a scan of stocks under the lower band on their daily charts.
And as of yesterday's close, there were 756 individual stocks trading under their lower bands.
As a point of reference, on February 11th, there were 6 stocks trading under their lower bands.
If I run a scan of stocks trading under their lower band on the 60 minute charts, the results are 999. And that is only because stockcharts.com limits the results. I suspect there is a higher number.
The problem is that convential measurements to evaluate the markets are not working. Pandemics don't care about standard deviations.
For example, I mentioned yesterday that the pivot low of 2,734 should be a strong support level. The S & P ended up closing at 2,741.37 or just above that level. The intra day low did take out 2,734 when it hit 2,707.22.
With the S & P trading about 135 lower, the market should open around 2,606 or right at the lower band.
Watch to see if this level offers any support. If it can't, the market should continue lower.
Resistance from yesterday should be at 2,707. The daily average true range is 102.66. The gap open should exceed that amount.
ADBE reports Thursday after the close and DOCU also reports the same day.
Here are the Key Levels for the Markets:
$VIX:
Major level: 40.62
Minor level: 39.84 **
Minor level: 38.28
Major level: 37.50
Minor level: 36.72
Minor level: 35.16
Major level: 34.38
Minor level: 33.60
Minor level: 32.03
Major level: 31.25
Minor level: 30.48
Minor level: 28.91
The VIX closed at 53.90, closing 6.6 points higher on the day. The next major level is 56.25.
The VIX is trading well above the upper band on its daily chart, which is 31.65.
It is also trading just under the the upper band on its 60 minute chart, This level is 55.06. Watch this level again today.
But clearly, the VIX is overbought.
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: 2,929.75
Minor level: 2,851.65
Major level: 2,812.50
Minor level: 2,773.45
Minor level: 2,695.35
Major level: 2,656.30 <
Minor level: 2,617.25
The S & P closed at 2,741.38. The market should open about 50 points below the major 2,656.30 level.
The S & P projects to open around 2,606. Watch the minor 2,617.25 level.
2,656.30 should be resistance on the upside.
2,757.58 is the lower band on the 60 minute chart. Watch to see if the S & P can clear the lower band. If it can't, expect more selling.
The violation of the lower band tells us that selling is not over.
QQQ:
Minor level: 214.87
Minor level: 213.30
Major level: 212.50
Minor level: 211.72 **
Minor level: 210.16
Major level: 209.38 <
Minor level: 208.60
Minor level: 207.03
Major level: 206.25
Minor level: 205.47
Minor level: 203.91
Major level: 203.13
Minor level: 202.35
Minor level: 202.35
Major level: 200.00
The QQQ closed at 195.22. 196.09 is minor resistance.
With the QQQ closed back under the midband, which is 195.50. This level should now be resistance.
The lower band on the 60 minute is 192.67. Watch this level today.
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 <
Minor level: 148.44 **
Minor level: 145.31
Major level: 143.75
The IWM closed at 125.88. The IWM closed 8.55 lower for the day. But, it still closed under the lower band on the daily chart.
The lower band on the daily chart is 137.23. Clearly an oversold market.
But, this does tell to expect a test of the lower band.
The lower band on the 60 minute chart is 130.09.
TLT:
Major level: 159.38
Minor level: 158.60
Minor level: 157.03
Major level: 156.25 <
Minor level: 155.48
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: 147.66
Major level: 146.88
The TLT closed at 156.53. The TLT closed under the upper band on the daily chart, which is 159.49.
Watch the upper band today. The TLT should open higher, so watch if it can clear this level.
170.89 is the upper band on the 60 minute chart and should be resistance.
GLD:
Major level: 159.38
Minor level: 158.60
Minor level: 157.03
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
The GLD closed at 153.93. Watch the minor 153.91 level. If the GLD can clear this level, it should move higher.
150 should be technical support.
XLE:
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: 46.88
Minor level: 46.09 **
Minor level: 44.53
Major level: 43.75 <
The XLE closed at 33.67. This market is still in free fall. The XLE closed 1.81 lower yesterday. And is still well below the lower band on the daily chart.
The lower band on its daily chart is now 46.31. I don't think I have seen a market this stretched.
Clearly another market in panic selling mode.
34.58 is the lower band on the 60 minute chart. And the XLE closed under this level as well.
These two measurements demonstrate how oversold the XLE is.
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
Minor level: 278.13
Major level: 275.00
Minor level: 271.88
Apple closed at 275.43. Apple dropped $9.91 or 3.47%.
But, Apple still shows strength by virtue of the fact that it is trading well above the midband on its daily chart. That level is 233.53 and Apple is still about $43 above it.
I expect a move to the midband at this point.
Having said that, Apple still moves below the lower band on its 60 minute chart. That level is 262. Watch this level today for possible support.
WATCH LIST:
Bullish Stocks: REGN, DXCM, CME, CLX, GLD, TLT, LSI, TREX
Bearish Stocks: BA, PANW, WEX, WDAY, CBRL, FDX, IT, VMW, MLNX, TWLO, CHKP, GWPH, ALXN, DLTR, WING, DIN, ATHM, ZEN, BLUE
