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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I did mention yesterday this ... "Of course, the selling could intensify, but this gives us some logic to determine what the market could do."
I was referring to where a potential low for the week could come in. Based on two different projection methods, I calculated the potential weekly bottom in the 2,672.50 to 2,680.95 area.
As it turned out, the S & P 500 blew through those targets and hit a low of 2,641.59, or about 30 points under the low end of the projection.
So, where does that leave the markets now?
First off, with the sell off this week, and an anticipated close towards the low end of the weekly price bar, we should expect that the low for this week will be violated before the high.
Ideally, the market opens higher next week and rallies to a point of resistance, which will allow some short trades to be entered.
The second concept revolves around the extreme bollinger bands. As I have shown on multuple webinars, the S & P 500 took out the upper extreme band on both the weekly and daily charts.
This tells us that at some point, we will most likely see a rally back to test the upper band. The question is when?
Yesterday did qualify as a selling climax, with a reading on the down to up volume at 9.52.
But, we may see multiple selling climaxes before this market turns. There were three selling climaxes during the last sell off and one with a 30.91 reading.
For the day, the S & P 500 closed 68.24 points to the downside, at 2,643.69. This put the S & P 500 under the major 2,656.30 level.
The close for yesterday was just above the next downside level, which is 2,636.75.
If the S & P 500 closes under this level it should tell us if the S & P 500 should drop to the next major level, which is 2,578.10.
As I have said on a few occasions, a normal pullback in a bull market is two levels. At this point, the S & P 500 has dropped two levels and for the bulls to remain in control, I would not expect a drop below 2,636,75.
If we do get two closes under 2,636.75, it is possible the nature of this market is changing.
By monitoring the levels we should get an idea of where this market will go.
On a short term basis, the market is oversold and a bounce could happen today.
Pre open, the S & P 500 is trading about six points to the upside. I would expect a bounce, but selling pressure to come into the markets. The key today will be to see if the S & P 500 can hold the 2,636.75 level.
The other key will be if the VIX can take out 25. 25 should be resistance so a violation should tell us that it will continue higher.
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 23.35 yesterday, just one cent above the minor 23.44 level. the objective should be to 25, but I would expect resistance at that level.
A move above 25 would tell us that selling is not over.
$SPX:
Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
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
I outlined the major levels above. On a short term basis, the key level is 2,646.50. And yesterday, the S & P 500 closed just under it.
If the S & P 500 closes under 2,646.50 today, it will help to confirm a move lower. A drop to 2,500 would be possible.
Another way to look at this is to say if the bulls are to remain in control, we would not expect a close under 2,646.50 today.
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
The QQQ closed at 162.80. Our objective was to 162.50 and the low for the day was 162.59, just 9 cents above the major level.
I do expect support at 162.50. So, if 162.50 is violated, it should signify further selling.
The 60 minute chart still remains in a uptrend. A bounce could happen.
IWM:
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
The IWM closed at 153.35, just above the minor 153.13 level. If 153.13 is violated, I would expect a drop to 150. And 150 should offer strong support.
A drop under 151.56 and the IWM could head lower. But, I don't expect it to move under that level.
TLT:
Major level: 121.88
Minor level: 121.49
Minor level: 120.70
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
The TLT closed at 120.26. The major 120.31 level was hit yesterday with a high of 120.82. For the downtrend to be over, I would expect the TLT to hit the 121.88 level.
But, yesterday formed a doji bar and watch the close. Watch the open. An open under 120.26 and expect it to act as resistance.
GLD:
Major level: 131.25
Minor level: 130.47
Minor level: 128.91
Major level: 128.13
Minor level: 127.35
Minor level: 125.78 **
Major level: 125.00 <
Minor level: 124.22
Minor level: 122.66
Major level: 121.87
The GLD closed at 125.98. The objective should be to 128.13, with support at 125.
If 125 is violated, the GLD could drop back to 122. Watch to see if 125 holds.
XLE:
Minor level: 76.95
Major level: 76.56
Minor level: 76.17
Minor level: 75.39
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 <
Minor level: 67.97
Minor level: 66.41 **
Major level: 65.63
The XLE closed at 67.18. The XLE continues to struggle to take out 68.75. If it cannot clear 68.75, a drop back to 65.63 could happen.
A breakout or breakdown is imminent. The question is when?
FXY:
Major level: 91.41
Minor level: 91.22
Minor level: 90.83 **
Major level: 89.06 <
Minor level: 88.87
Minor level: 88.48
Major level: 88.28
Minor level: 88.09
Minor level: 87.70
Major level: 87.50
Minor level: 87.31
Minor level: 86.92
The FXY bounced again and closed at 90.98. This put the FXY 10 cents above the upper band on the daily chart.
Watch to see if the FXY can hold the upper band. It is overbought, but is not the time to short.
AAPL:
Major level: 187.50
Minor level: 185.94
Minor level: 182.81
Major level: 181.25
Minor level: 180.47
Minor level: 178.91 <
Major level: 178.13
Minor level: 177.35
Minor level: 175.78
Major level: 175.00
Apple closed at 168.85. We were looking for a drop to 168.75, which was hit yesterday.
Same scenario as yesterday.
168.75 is a key level. If Apple has two closes under 168.75, it could drop to 150.
WATCH LIST:
Bullish Stocks: NTES, GWW, AVGO, NVDA, ADBE, ALNY, AMT, ZBRA, VRSNm GRUB, ALL, CTSH, AABA, WEC, LUV, DAL, SQ, CAR, WGO, TRIP, TWTR
Bearish Stocks: TSLA, ZBH, DISm CNI, BG, WBA, WBA, AIG, HOG, DISH, BITA
Be sure to check earnings release dates.