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 market opened as if we were going to get a flash crash. But, the market managed to find support and rally back to close only 13.16 points lower.
When you consider that the market opened with a bearish gap of 37 points, a 13-point lower close does not seem that bad.
For a bearish day, the price action turned out rather bullish.
But, I have been saying that I would still expect a rally if the market sold off because all short term time frames are still bullish. And that is what happened.
We also have the objective up to the major 2,968.80 level.
And with the 30 & 60 minute charts still bullish, buying under the lower band off the 10 minute chart is a setup that you want to look for.
I mentioned yesterday that the S & P 500 should open at or under the lower band on the 10 minute chart.
And that is what it did.
The lower band on the 10 minute was 2,905. And the market opened at 2,908.89 or a few points above it.
After the open, the S & P 500 dropped to a low of 2,898.21 or about 7 points below the lower band. From there, the market rallied to have the first 10 minute bar close at 2,910.39, or about 12 points above the lower band.
After this happened, the market proceeded to rally all day to guess where?
If you would have said the midband on the 10 minute chart, you would be correct.
The midband was roughly 2,935 and the high for the day was 2,937.32.
I have shown this pattern on various webinars in the past and will show it again tomorrow for the move on the S & P 500 yesterday.
Of course, this was yesterday's news, where do we go from here?
Well, we know with the market stopping at the midband on the 10 minute, that a retest of the lower band is possible.
The lower band now reads 2,902.40.
But the retest can stop above the lower band, so let's look at possible are of support.
2,915 is the support level from yesterday's daily bar. And there is support at 2,920 from the daily bar.
There is a resistance level at 2,895.50. And one at 2,907.70.
The 2,895.50 level should be a key level for the short term. The significance is that if the S & P 500 has two closes under this level, we would expect a drop to the 2,860 area.
Pre open, the S & P 500 is trading about 15 points lower. This would project to an open around 2,917.
Watch the various levels I mentioned above.
The final comment I have about yesterday is this. Last week, I mentioned the down to up volume.
With a projected gap open yesterday of over 35 points, I would have expected a reading on the down to up volume over 2.50. But, that did not transpire. The down to up volume for the day was only 1.65. The selling was actually rather tepid yesterday.
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 opened at 12.89 and ran to a high of 18.80 before dropping to close at 15.44.
I did say this yesterday... "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."
And as it turned out, the VIX got 5 cents above the major 18.75 level before dropping.
At this point, watch the minor 16.41 level. It should be resistance. So, clearing this level would be significant.
On the downside, 14.84 is the key level. If the VIX drops under this level, I would expect the VIX to head lower.
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
I mentioned above that minor support is at 2,895.50 and 2,907.70.
There is also a minor support level at 2,919.90.
Short term charts still remain bullish, but a retest of the lower band on the 10 minute chart is likely.
On the daily chart, the S & P 500 continues to inch closer to an uptrend.
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 189.94. The next objective for the QQQ should be to 193.75.
The minor 189.06 should act as support. Unlike the S & P 500, the QQQ did manage to close above the midband on the 10 minute chart. That level is 189.83.
Still showing more strength than the S & P 500.
But, at this point, expect a lower open.
Watch the minor 188.67 level today. The QQQ should open just under it and if it can reclaim this level, it should head higher. If it can't, a drop to 187.50 would be likely.
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 160.71. The IWM actually closed to the upside yesterday. This market which has been the laggard actually showed the most strength yesterday.
At this point, minor support is at 159.38 and 157.81.
Both short term charts are bullish. And technical support is around 157.
The IWM is overbought in the short term, so a pullback would not be out of the question.
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
The TLT closed at 124. The TLT did not quite hit 125. It got as high as 124.38.
125 is also a short term overbought level.
124.02 is a minor support level. And 124.61 is minor resistance.
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 120.81. Watch to see if the GLD can hold the minor 120.31 level. If it can, it should bounce.
Short term charts remain bearish and resistance is at 121. 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 64.31. Watch to see if the major 62.50 level can hold as support. If it can't, it should head lower.
Minor support is at 64.06 and if this level can hold, the XLE should continue higher.
65.63 should now be resistance. The XLE is oversold short term.
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 208.48. Apple got as low as 203.50 before rallying back about 8.
Short term charts still remain bullish. And technical support is also around 202.
206.25 is a support level and if it is violated, Apple could head lower.
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
Be sure to check earnings release dates.