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 continued to reel from the trade negotiations. Or should I say non-negotiations?
The market closed the day at 2,884.05. For the day, it was down 48.42 points. And the range picked up from Monday.
The daily range yesterday was 50.43 points. This was almost 200% of the daily average range of 27.48 points.
But, the market managed to rally late in the day to close at 43% of the daily price bar.
In looking at the market intraday yesterday, I kept wondering when the market would bounce. A bounce was inevitable because of how oversold the market has been.
We know that because of the fact that the S & P 500 traded under the lower band on the 10 minute chart. And it did so for most of the day.
And it bounced late in the day. But having traded under the lower band, I would expect a retest of the lower band again.
These are charts I will show in today's webinar.
Quite frankly, the major pattern we anticipated was that the S & P 500 would retest the lower band on the 10 minute chart. This was highly likely. The issue of support was another issue.
There were a few levels of potential support that all failed.
The high for the day which was 2,913.03 came in at the resistance level from Monday's daily bar.
And the low for the day was 2,862.60 which was well under any potential support level I mentioned.
It broke well under the 2,897.50 resistance level.
At this point, the key level for the S & P 500 is 2,871.08. If the S & P 500 has two closes under 2,871.08, I would expect a drop to 2,812.50.
I still expect another rally after the selling calms down. And the market is getting closer to the bottom on this selloff.
Yesterday, the S & P 500 stopped at the lower band on the 30 minute chart. The lower band is 2,861.76 and the low for the day was 2,862.60.
The question now is will this level hold?
As you know, if it can't, I would fully expect another down leg to retest the bottom band if it is violated.
What is interesting about this selloff is that the S & P 500 is actually inching closer to moving into an uptrend on its daily chart. And the S & P 500 is trading above the midband as well. The midband is 2,768.68.
The close yesterday was about 120 points above the midband which I would expect to act as support if the market drops there.
Pre open, the S & P 500 is trading to the downside about 18 points. This projects to an open around 2,866.05.
There is a support line at 2,858.90. If this level cannot hold, watch the 2,836.90 level. I would not expect the market to break under it. If it does, look for lower prices to follow.
Even though this selloff seems rather strong, remember that the market has moved up 8 major levels from the December bottom.
A normal pullback would drop 2 levels, or to the 2,812.50 level. A deeper pullback would imply a larger pullback off the top.
Disney reports this afternoon 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
The market has dropped one major level at this point and closed under the major 2,890.60 level.
The key now will be the minor 2,871.08 level. Two closes under 2,871.08 would imply a drop to 2,812.50.
But, when a major level is violated, the next minor level often acts as support. This, of course, would be 2,871.08.
For the short term, the key will be if the lower band on the 30 minute chart can hold as support. That price is now 2,861.76. The projected open should be about 5 points above the lower band. Watch to see if it holds as support.
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 186.24. The next level on the downside is 185.94. Two closes under this level and the QQQ should drop to 181.25.
184.38 is a minor support level. And unlike the S & P 500, the QQQ is well above the lower band on the 30 minute chart. The lower band is 182.57.
This does suggest that the QQQ is still the stronger of the two markets and will most likely get the sharpest bounceback.
"Watch the minor 188.67 level today" which is what I wrote yesterday. The high for the day happened to be 188.67.
The key level for today will be the minor 185.94 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 157.53. The IWM is holding above the midband on the daily chart. The midband is 156.48. So, the IWM is holding about a point above the midband. This should be support and a break should indicate lower prices to follow.
Yesterday's low was exactly 156.25 which should be a support level. If the IWM breaks under 156.25, which is close to the midband, I would expect a drop to 154.69.
Like the QQQ, the IWM is above the lower band on its 30 minute chart. It is right around the midband which is 157.47. Watch this level today.
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 finally got the 125 level we were looking for.
At this point, I expect support at 124.22. And a potential move up to 128.
The TLT will need to clear 125 first. If it does, look for higher prices.
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 121.21. A close today above 121.09 and the GLD should get the bounce. A move up to 125 would be expected.
Short term charts remain bearish and resistance is at 121. But, the GLD broke above the midband on the 30 minute chart. That level is 121.05 and should now be support.
120.31 should also 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 63.75. Watch to see if the major 62.50 level can hold as support. If it can't, it should head lower. Still looking for support at 62.50.
Minor support is at 64.06 and if this level can hold, the XLE should continue higher.
63.28 is a minor support level.
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
Apple closed at 202.88. A test of 200 is likely. And if Apple finds support there, a long would be the trade.
Short term charts still remain bullish. And technical support is also around 197.
204.69 should be resistance.
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.