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Yesterday closed out the month of October with a continuation of the bounce we were looking for from its oversold condition. And of course, yesterday closed out the month of October which I heard was the worst month of trading since 2011.
More on the monthly analysis in a moment.
Yesterday the S & P 500 closed 29.11 points higher, at 2,711.74. The fact that the market could not close under 2,646.50 for two days bodes well for the market. Two closes under the major 2,646.50 level would have suggested lower lows to follow.
But, at this point, I would expect resistance at the 2,744.10 level. So, on the upside, this should be a key level to watch. If the S & P 500 can clear 2,744.10, I would expect further movement to the upside.
And the resistance level from yesterday's daily bar is 2,720 area. Under that level, the next support line is 2,709.
The S & P 500 had a seven-level drop during this sell off. It began at the 2,939.50 level and held at the 2,597.70 level. We have not seen a seven-level drop since February of this year. The drop during that sell off was 340 points and the market was able to recover and go onto new highs.
This sell off has measured 337 points and mirrors the last major sell off.
The major difference between the two sell offs is that the February sell off still remained above the upper extreme bollinger band on the monthly chart, while this sell off closed under it.
In fact, the close was 2,711.74 and the upper band is 2,720.41. With a pivot low of 2,603.54, the S & P 500 managed to recover 108 points in two days and appeared as if it could recoup the lower band, only to fall short by about 9 points.
As you know, this should be resistance, so I would want to see two closes above the 2,720.41 level in order to invalidate the set up.
As for the monthly price bar, it certainly qualified as a bearish long range candle. The range for the month was 336 points and the monthly average true range is 135 points. So, the monthly bar was almost 250% of the average.
It also closed at 32% of the bar. This puts the odds of violating the low before the high at around 70%.
And the midpoint of the monthly bar is 2,772 which should be a level to watch on a rally. At this point, I would expect resistance there.
Finally, I want to point out that the QQQ also qualified as a bearish long range candle on its monthly chart. The range was 27 points as compared with the average which is 10.86. So, the QQQ had a range that was almost 250% of the average.
The midpoint of the monthly bar for the QQQ is 174 and would be a level to watch to see how it reacts.
And the last thing I want to mention is that the S & P 500 is trading under the midband on its daily chart.
The midband is 2,741.74 and yesterday's high of 2,736.69 was about 5 points lower than that level.
Pre open, the market is trading about 12 points higher and projects an open around 2,724. Watch the midband on a rally. If the S & P 500 cannot clear it, I would expect a reversal to the downside.
The other scenario at the moment is to wait to see if the S & P 500 can close above the midband. If it can, it should head higher. A failure tells us there is more selling to follow.
I know I have discussed many price levels and my suggestion is to print this out and outline the important price levels. Then you will have the sensitive levels readily available.
This afternoon, we will get earnings from Apple. A good report and it could move the whole market.
Continue to monitor the levels as I mentioned.
Here are the Key Levels for the Markets:
$VIX:
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
Major level: 25.00 <
Minor level: 23.44 **
Minor level: 20.31
Major level: 18.75
Minor level: 17.19
Minor level: 14.06
Major level: 12.50
The VIX closed at 21.06. This now sets up a scenario where 23.44 should be resistance and a close under it and the VIX should drop to 18.75.
20.31 is a minor support level. If that level does not hold, I would expect a test of 18.75.
A break of 20.31 and the VIX should head lower.
SPX:
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10
Minor level: 2,731.90
Minor level: 2,707.50 **
Major level: 2,695.30
Minor level: 2,683.10
Minor level: 2,658.70
Major level: 2,646.50
Minor level: 2,634.30
Minor level: 2,609.90
Major level: 2,597.70
A close today above 2,707.50 and the S & P 500 should test 2,744.10. As I mentioned before, I would expect resistance there. So, if the S & P 500 can clear that level, it would be bullish.
2,700 should offer minor support. Also, watch the minor 2,724.60 level today.
QQQ:
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
Minor level: 160.94
Minor level: 157.81
Major level: 156.25
The QQQ closed at 169.82. Unlike the S & P 500, the QQQ did manage to close above the midband on its daily chart. That level is 168.27 and should offer support.
At this point, the QQQ will need two closes above 170.31 to move up to 175.
If the QQQ can clear 171.88, I would expect it to head higher.
168.75 should offer support. And the midpoint of the monthly bar is 174. Watch this level on a rally.
IWM:
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 150.03. It barely cleared the 150 level. 148.44 should offer minor support.
And watch the 151.56 level on the upside. It will need two closes above that price to test 156.25.
157 is the midpoint of the monthly bar, and should be monitored on a rally.
TLT:
Major level: 115.63
Minor level: 115.24
Minor level: 114.45
Major level: 114.06
Minor level: 113.67 **
Minor level: 112.89
Major level: 112.50
The TLT closed at 113.58. The TLT closed under the major 114.06 and the minor 113.67 level.
This now suggests that if the TLT can close under 113.67 today, it should drop to 112.50.
The midpoint of the monthly bar is 114.88 which is right around the minor resistance level. Where the TLT closes today should give us an indication as to whether this bear move can continue. And the odds favor more to the downside.
113.28 is minor support.
GLD:
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63 <
Minor level: 114.85 **
Minor level: 113.28
Major level: 112.50
Minor level: 111.72
Minor level: 110.16
Major level: 109.38
The GLD closed at 115.15. Yesterday's low traded under the minor 114.85 level but the GLD will need two closes under that level to drop to 112.50.
114.45 is minor support. And 116.02 is minor resistance.
Daily trend remains bearish but the 60 minute chart is bullish. Technical support on the 60 minute chart is 114.43.
XLE:
Minor level: 72.66
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
The XLE closed at 67.16. Biased for a test of 68.75.
66.41 is minor support. And minor resistance is at 70.31.
The midpoint of the monthly bar is 71.36. Watch this level on a rally.
FXY:
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97
Minor level: 84.58 **
Major level: 84.38
Minor level: 84.18
Minor level: 83.79
Major level: 83.59
The FXY closed at 84.71. The FXY hit the 84.38 objective with a low of 8 cents under the level and rally as we expected.
84.47 should now be minor support. And a close today above 84.58 and the FXY should test 85.16.
AAPL:
Major level: 231.25
Minor level: 229.69
Minor level: 226.56
Major level: 225.00
Minor level: 223.44
Minor level: 220.31
Major level: 218.75 <
Minor level: 217.19 **
Minor level: 214.06
Major level: 212.50
Apple closed at 218.86. Apple did bounce from its oversold condition, but I would stand aside until after earnings this afternoon.
WATCH LIST:
Bullish Stocks:AMT, PG, LW, WPC, O, PEG, SAVE, TWTR, KDP
Bearish Stocks: LMT, ANET, GS, FDX, BIDU, MMM, GD, BABA, DE, CMI, CAT, FANG, URI, RCL, ALL, SWKS, JACK, CELG, GILD
Be sure to check earnings release dates.