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.
CURRENT POSITIONS:
GOGO Long at $19.93
Total Premium Collected $1.95
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RRC Long at $11.85
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RRC Long at $9.20
RIG Long at $8.81
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FEYE Long at $17.18
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ET Long at $11.78
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DBX Long at $19.70
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DBX Short March 27th - $21 Call @ $.25
ET Long at $7.50
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AGNC Long at $13.19
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MFA Long at $4.20
MFA Short April $5 Call @ $0.40
FCX Long at $6.93
FCX Short April 3rd - $7 Call @ $0.35
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We had been looking for a bounce in the markets and yesterday we finally got it.
There were a number of reasons why I was looking for this bounce. And I do want to name a few.
The bullish percent index had bottomed out at 1.4% on March 12th. This reading was even lower than the reading at the bottom of the bear market in 2009.
But, as I have mentioned before, these sentiment indicators are not perfect in timing a reversal. This low reading was reached 9 days ago, 7 days before the market actually formed a pivot.
The low reading puts us on alert that a reversal should be coming.
The reading for the bullish percent index closed out yesterday at 19.2%. So, it shows you how fast it can move.
The other factor was the fact that the S & P 500 had been trading under the lower extreme band on the daily chart. The pivot low formed on the 8th day is traded under the lower band.
Even with yesterday's historic move in the market, the S & P is still trading under the lower band on its daily chart.
The lower band is 2,510.63 and yesterday closed at 2,447.33.
The S & P is still 63.30 points under the lower band. For this move to gain some traction, the S & P will need to close above the lower band. At this point, it should be resistance until it closes above it.
I mentioned that for a bounce to happen in the market, the S & P will need to close above the lower band on the 60 minute chart. And that happened yesterday as I pointed out in the update.
Finally, we had two consecutive days where the S & P and the VIX both closed lower. This happened on Friday and Monday. As I have said, this divergence is another warning that a change in direction should be coming.
The S & P had already had multiple selling climaxes. In fact, there were 9 in total in this sell off.
The market moves higher because of buying. But, remember, it can move higher because of lack of selling. Or the short selling has subsided.
The biggest one day move in the S & P, which was 9.38%, most likely had quite a few participants scrambling to cover short positions.
If we close above the lower band today, I will share where I feel this rally could go.
The range for the day was 105.27. But, it did gap 43.71 points above the high from Monday.
So, if you include the high to high relationship, the move was 148.98 points. This was almost the daily average true range, which is 151.18.
The day closed out at 98% of the range of the daily price bar. This does suggest that yesterday's high of 2,449.71 should be violated before the low of 2,344.44.
Support from yesterday's daily price bar is in the 2,395 to 2,397 area.
If you put on the MFA alert from the other day, you no doubt know that the stock price took a major hit yesterday.
MFA took a major hit yesterday based on the fact that the company released a statement saying that they have had margin calls that they cannot meet.
One of the main reasons I made the recommendation was because on March 11th, they announced the payment of a 20 cent quarterly dividend.
The fact that they announced this dividend was an indication to me that business was fine.
Now, two weeks later they are saying they cannot meet margin calls because of the pandemic.
They can, of course, renegotiate their debit burden, which I am sure they are attempting to do.
And yesterday, over 50 million shares changed hands. This was over 10% of the float.
At this point, we have no choice but to hang in there. Someone is buying their shares, which does suggest that they may be able to work out a deal. Of course, there is no guarantee that will happen.
But, I will try and get some clarity on the dividend and the future operations of the company, and keep you apprised when I do.
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
The VIX closed at 61.67. The VIX actually closed .08 points higher on the day. So, the VIX and the S & P diverged again yesterday. Both closed higher on the day.
The VIX got as low as 52.17 intraday before rallying back almost 10 points.
Look for resistance around 62.50. Technical resistance is around 70.
S & P 500:
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
Minor level: 2,539.06
Major level: 2,500.00
Minor level: 2,460.95
Minor level: 2,382.85 **
Major level: 2,304.75 <<
Minor level: 2,226.65
The S & P closed at 2,447.33. By reclaiming the minor 2,382 level, it should now be support.
Look for a move to 2,500, but the S & P needs to clear 2,460.95.
2,385 should provide technical support.
Pre open, the S & P is trading slightly higher. Watch the daily lower band today.
QQQ:
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
Minor level: 167.19
Minor level: 164.06
Major level: 162.50
The QQQ closed at 183.66. The QQQ jumped 7.74%.
Look for support at the major 181.25 level.
Next target higher should be 187.
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 108.62. The IWM closed 9.15% higher for the day.
Still trading below the lower band on the daily chart, which is now 123.53. This level should be resistance, until the IWM can close above it.
The 105 area should provide technical support.
TLT:
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
Minor level: 146.10
The TLT closed at 162.91. The TLT closed virtually on the upper band on the daily chart, which is 161.84.
Watch this level today. A break under it and the TLT should head lower.
Resistance should be at 174. And support at 152.
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 153.40. The GLD closed 7.10 points higher.
Watch the minor 153.91 level today. It needs to clear this level to head higher.
The 150 area should now be 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 27.35. The XLE closed 16.04% higher on the day.
Still about $10 under the lower band. The lower band on the daily chart is now 37.31.
The 26 area should now be technical support.
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 246.88. Apple closed $22.51 higher yesterday. Apple jumped 10.03%. This should not be a shock, as I have been saying that Apple should make a nice move when the market bounces.
Apple is still in an uptrend on its daily chart. But, it's below the midband, which is 236.11. This would be resistance until it is violated.
The 242 area should be technical support.
WATCH LIST:
Bullish Stocks: ERY, CLX, TDOC, DOG, KR, UUP
Bearish Stocks: CMG, ORLY, INTU, AVGO, FLT, IDXX, LII, MCD, ALGN, MMM, NSC, CMI, ADP, HON, IBM, BA, DIS, ADI, UHS, AZPN, AAP