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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The S & P 500 managed to bounce from the massive oversold condition from Monday. For the day, the S & P 500 closed 22.54 points to the upside.
The market managed to close at 2,834.41. And it managed to trade above the high of the daily price bar from Monday.
The daily range was 32.42 points which almost replicated the daily average true range of 34.87 points.
The key at this point is if the major 2,812.50 level can hold as support.
Yesterday's low of 2,820.12 was about 8 points above the key level. If the market can consolidate at this level, it should tell us if this pullback is over. Or if it can't, we would expect more selling pressure.
And as I mentioned yesterday, the market had a selling climax on Monday, with down to up volume reaching 9.85 to 1.
One selling climax does have the power to stop a selloff, but as a timing indicator, it is not 100% accurate. That is because the market can have multiple climaxes before it turns.
As an example, the last selling climax came on December 4, 2018 when the reading was a massive 14.31 points. As it turned out, that was just the beginning of the last downswing for the market before it bottomed out on December 24th.
The downswing from December 3rd to December 24th was almost 500 points.
This would imply that for this pullback to end, the market should not trade below Monday's low. Monday's low was 2,820.12, which is a price level to be aware of.
What is interesting is that the S & P 500 continues to inch closer to crossing into an uptrend on its daily chart.
The 200 ema is now within 50 cents of the 253-day average. The 200 ema is now 2,771.54 and the 253-day average is 2,772.03.
So, it is possible that we could see this bullish crossover in a few days. And if this can happen, it would certainly help to confirm that this pullback should be short-lived.
We can also scale down and take a look at the short term charts to help us get a feel what the market should do.
Both the 30 minute and 60 minute charts are now in downtrends.
And the market breached the lower band on the 30 minute chart three times, the most recent breach being on Monday.
The midband on the 30 minute chart is 2,904 and should be resistance as the market approaches it.
And the lower band is 2,809. A retest is highly probable. And the usual pattern when a bottom forms is that the market will consolidate above the lower band.
On the 60 minute chart, price is well above the lower band. That level is 2,776.
The midband is 2,885. So, the midbands on the 30 and 60 minute charts are within 24 points of each other.
You certainly want to watch this area on a continued rally.
At this point, I would be inclined to short the market if it stalls at the midband with a price objective to a retest of the lower band on the 30 minute chart.
The resistance from yesterday's daily bar is in the 2,827 to 2,836 area.
Pre open, the S & P 500 is trading about 13 points lower. This would project to an open around 2,821. The projected open is right at the midband of Monday's bearish long range candle.
Based on this, I would expect a drop to 2,809. Watch if the market can hold above 2,809. If it can't, it should drop lower. But, this level is right around the major 2,812.50 support level.
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
The VIX closed at 18.26. It gave back 11% and closed 2.29 points lower.
This put the VIX back under the major 18.75 level. With the market trading lower in the pre market, I would expect the VIX to be higher.
Watch the 20.31 and 21.88 level for possible reversals. If the VIX reverses down, the market should head up.
SPX:
Major level: 2,968.80
Minor level: 2,949.25
Minor level: 2,910.15
Major level: 2,890.60
Minor level: 2,871.08
Minor level: 2,832.03 **
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
Yesterday's close managed to close above the minor 2,832.03 level. The question for today will be if it can close above it again.
If it can, that would help to confirm that the 2,812.50 level has held.
And it suggests the objective is back up to 2,890.60.
Minor support is at 2,807.60.
Watch the levels I mentioned above.
QQQ:
Major level: 193.75
Minor level: 192.19
Minor level: 189.06
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
Minor level: 167.19
The QQQ closed out Friday at 180.54. Watch the 179.69 level today. The QQQ will need two closes under 179.69 to drop to 175.
178.75 is the lower band on the 30 minute. Watch to see if the QQQ can hold above it today.
178.13 is a minor support level.
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
The IWM closed at 153.54. A break under 151.56 and the IWM should drop to 150.
150 should offer support.
The lower band on the 30 minute chart is 151.63 which is very close to the resistance level. This could offer support.
TLT:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39 **
Major level: 125.00 < HIT
Minor level: 124.61
Minor level: 123.83
Major level: 123.44 <
Minor level: 123.05 **
Minor level: 122.27
Major level: 121.88
Minor level: 121.49
The TLT closed out at 125.36. The TLT could not close above 125.39 yesterday and will still need two closes above that level to move up to 128.13.
At this point, watch the major 125 level. If the TLT breaks under it, it should then drop to 124.61. 125.20 is minor support.
Short term charts remain strongly bullish.
GLD:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
Minor level: 124.22
Minor level: 122.66 **
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 <
The GLD closed at 122.46. The GLD will still need two closes above 122.66 to test 125.
The GLD could retest the upper band on its 30 minute chart. That level is 122.73. Overbought in the short term. 121.88 should be support.
XLE:
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
Minor level: 64.85
Minor level: 63.28 **
Major level: 62.50 <
Minor level: 61.72
Minor level: 60.16
Major level: 59.38
The XLE closed at 63.72. This now suggests that if the XLE can close above 63.28 today, it should move up to 65.63.
63.09 is minor support. A break under this level, and the XLE could test 62.50 again.
65.60 should be technical resistance.
AAPL:
Major level: 212.50
Minor level: 210.94
Minor level: 207.81
Major level: 206.25
Minor level: 204.69
Minor level: 201.56
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 <<
Apple closed at 188.66. Apple needs to hold 187.50. If it can't, a drop to 150 is possible.
Apple is now sitting between the 200 ema and the 253-day average.
The 200 ema is 185.33 and the 253-day average is 189.87. Watch for a break of either level.
At this point, I suggest waiting to see which direction Apple breaks.
Short term it is oversold, like everything else. The lower band is 185.87.
WATCH LIST:
Bullish Stocks: NOW, FLT, LLL, WDAY, MCD, HRS, MKC, SAFM, WIX, TEAM, DRI, AWK, OLLI, ZEN, ROKU, PAYX, MNST,
Bearish Stocks: GOOGL, ILMN, GWW, TSLA, AMGN, NVDA, FFIV, BIDU, CAT, UPS, CTXS, AMG, SLG, PSX, NTAP, SQ, R
Be sure to check earnings release dates.