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
ASNA Long at $14.20
Total Premium Collected $0.75
DUST Long $4.50
Total Premium Collected $0.70
SNAP Long at $14.54
Total Premium Collected - $2.10
RRC Long at $11.85
Total Premium Collected $0.70
RRC Long at $9.20
RIG Long at $8.81
Premium Collected - $1.45
FEYE Long at $17.18
Total Premium Collected $0.80
CLW Long May - $20.00 call for $2.00
AMC Long at $16.16
Total Premium Collected $0.35
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Friday, I suggest adding to the RRC position. And Friday was also the expiration of the SNAP options.
Because we were able to close out the $11.50 calls at 30 cents, the net loss was only 10 cents per share. That reduces the amount of premium collected on this position to $2.10 per share.
Before I get into this morning's pre market carnage, I want to discuss the price action from last week.
Friday ended up closing 28.11 points higher. It closed out the day at 2,945.63. And the high for the day came in at 2,947.85.
This puts the objective we have been seeking of 2,968.80 back to within 20 points.
And for the week, the S & P closed 5.76 points higher. The weekly range contracted to only 53.63 points, as compared to the 70.05 weekly average true range.
The weekly support levels are at the 2,927 to 2,943 area.
The real story is that the market is trading about 47 points lower as I write this. This sell off is based on President Trump tweeting that he may increase tariffs on Chinese goods from 10% to 25% this Friday.
He also suggested that he would impose 25% tariffs on another $325 Billions worth of products.
These comments have sent the market reeling.
The question now is what should we be looking for? And could this be the start of a deeper pullback?
With a projected open 50 points lower, the open should be around 2,895. This would be under the 5 previous weekly closes.
Even with an open around, 2,895, the market would still be above the lower bands on the 30 & 60 monute charts.
The lower band on the 60 minute chart is 2,758. And the lower band on the 30 minute chart is 2,859.
This suggests that even with an open 50 points or so lower, the market would would not be oversold in the short term. In other words, the S & P could drop another 35 to 40 points from a lower open to be oversold.
The only intra day timeframe that would be oversold based on this lower projected open is the 10 minute chart. The lower band on the 10 minute chart is 2,906.53. So, the S & P should open about 11 points under the lower band on the 10 mnute chart.
At this point, I would wait until the S & P closes back inside the lower band on the 10 minute chart before taking any long positions.
If we look at our resistance levels, the key level to watch at the moment will be the minor 2,792.98 level.
If the market has two closes under 2,792.98, it would suggest a drop to 2,734.40.
This would concern me that the market is shifting to a major corrective phase.
A drop to the 2,745.40 level would be a three level drop off the top. As you know, in bull markets, the pullbacks should not drop more than two levels.
So, a three level drop would suggest we want to short the next rally, assuming the market has two closes under 2,745.40.
The flip side of this is that the S & P could hold support at or above 2,745.50. If it can, this would be nothing more than a normal pullback in a bull market.
Regardless of which scenario unfolds, be prepared for some volatile porice action this week.
Earnings do continue this week, with Disney reporting Wednesday after the close. And BKNG reports Thursday after the close.
Here are the Key Levels for the Markets:
$VIX:
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
Minor level: 10.16
Major level: 9.38
The VIX should open substantially higher. Watch for support or resistance at the major levels.
The major level that the VIX should not exceed is 18.75. If the VIX takes out 18.75, I would expect further movement to the upside.
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
As I said above, the market should open substantially lower this morning. Watch the lower band on the 10 minute chart, which is 2,906.
The key resistance level is the major 2,890.60 level. If the market cannot hold this level, a drop to 2,871 would be expected.
If the market can hold 2,890.60, look for a push up to 2,910.15.
Even with a massive lower projected open, short term charts remain firmly bullish. This should tell us that there is a buying opportunity at some point.
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 yesterday at 191.11. The next objective for the QQQ should be to 193.75.
But, at this point, expect a lower open.
Like the S & P, the short term charts are bullish. The lower band on the 10 minute chart is 187.37.
Minor support is at 188.28. Watch to see if the QQQ can reclaim this level today. If it can, it should head higher.
Technical support is still around 187.
Like the S & P 500, both short term charts are bullish. And like the S & P, the QQQ is very close to crossing into an uptrend on its daily chart.
Watch the 184.38 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 160.53. It closed above the midband, but I would expect that level to be tested today. The midband is 156.43.
150 is a major support level for the IWM, so if this level is violated, I would expect the IWM to head lower.
Both short term charts are bullish. And technical support is around 155.
TLT:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
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
Minor level: 120.70
Major level: 120.31
The TLT closed at 123.66. The TLT should bounce based on the pre market sell off. Look for 125 to get hit.
125 is also a short term overbought level.
If the TLT takes out 125, watch the next minro level, which is 125.39.
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: 121.09 **
Major level: 120.31<
Minor level: 119.92
Minor level: 119.14
Major level: 118.75 <
The GLD closed at 120.65. The GLD should get a bid at the open. Watch to see if it can lear the major 121.88 level.
Short term charts remain bearish and resistance is at 122. I would expect resistance at this level, so if the GLD can take it out, it should head higher.
Both the 30 minute and 60 minute charts remain bearish.
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 64.25. Watch to see if the major 62.50 level can hold as support. If it can't, it should head lower.
At this point, a drop to 62.50 should be expected. 62.50 should be support, but if it cannot hold, a much deeper pullback should happen. A break under this level and two closes under 59.38 should indicate a much farther drop.
65.63 should now be resistance.
AAPL:
Major level: 212.50
Minor level: 210.94
Minor level: 207.81
Major level: 206.25 < HIT
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
Apple closed at 211.75. With the sell off, I do expect a lower open on Apple.
Short term charts still remain bullish. And technical support is also around 202.
187.50 is a key level on the downside.
WATCH LIST:
Bullish Stocks: ROP, NTES, SHOP, LLL, APD, VMW, UNP, DE, SWK, CB, JNJ, WIX, RCL, KLAC, KMB, KSU, WCN, MCHP, UAL, CSX, WPC
Bearish Stocks: GOOGL, BDX, AMGN, CVX, EA, PSX, ALNY, LW, SQ, XEC, CLB, Z, WERN, APA, MOS, MRO
