While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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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PHM - Long Dec $25.50 put @ $0.80
PHM - SHORT Dec $24.00 put @ ($0.35)
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As we wind down to the end of November, yesterday closed with a massive melt up.
Of course, a lot of the move was generated by the Fed discussing their future interest rate projections and plans.
Never the less, it was the biggest one day move I have seen in a long time. For the day, the S & P 500 closed 61.58 points higher. The market closed at 2,743.78.
And not only did the S & P 500 take out the 2,695.30 level, but it essentially hit the 2,744.10 level. In one day! By the way, I say essentially because yesterday's high was 2,744, so I will say that level was hit.
I have always said that we can craft a scenario as to how price should trade. And this is important because is price does not do what we expect, it is also giving us valuable information.
But, the thing we can never predict is how big the move should be.
This was true at the all time high, when the S & P 500 stopped almost EXACTLY on our 2,939.50 line. For a refresher the all time time came in at 2,940.91.
I remember at the time how I suggested that we should not short that top because of the strength of the market and I did not expect the pullback to be that deep. In hindsight, that was a mistake.
And now we have the market reversing after it failed to close for two days under the major 2,646.50 line.
Since that time, which was only 3 days, the market has moved up two levels.
This is why I say, predicting the turning points can be readily done. The depth or strength of the ensuing move is what we cannot predict.
Quite frankly, if I could predict the extend of the ensuing move, I would most likely be sitting on a beach in the carribean sipping drinks with little straws in them.
But I digress.
As for yesterday, we had a general idea of how the day should trade.
I mentioned that because of the bullish gap pre open, the support level should be about 1/2 the gap fill. If that did not hold, the prior day high or close should offer support.
As it turned out, the low for the day was 2,684.38. And Tuesday's high was 2,682.53. One half the gap was 2,686.99. And half of the gap fill and prior day high came to 2,684.76.
As it turned out, the high for yesterday was 2,684.38. So the numbers I shared yesterday were pretty good at predicting the low for the day.
The question is how do we handle this in the future?
And my suggestion is that we will use a one half hedge when I feel a major turning point is coming in the market. This trade will help us if we are wrong and still allow us to capture some of the move.
For today, the odds of taking out the high before the low is 100%! Yesterday closed at the high.
And support from yesterday's daily bar goes as low as 2,714.
I do want to scope out and look at the November monthly price bar.
At this point, the range is only 184 points. The monthly average true range is 138.89 points, so the range was actually exceeded the average.
But the key for the monthly bar is this.
The upper band on the monthly chart is 2,741.41. And the midpoint of the monthly bar is 2,723. And last month's close was 2,711.74.
The key at the moment is if the monthly bar can close above the upper band. If it can, this would be bullish and the this market should continue higher.
Which would set up a Santa Claus rally.
I hope this has been helpful.
Salesforce reported and was up $13.10 off their report. And TIF dropped $12.41 off their earnings.
This afternoon we will hear from PANE, WDAY and SPLK.
Continue to monitor the levels as I mentioned above.
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 18.49. It closed down .53 for the day.
Watch the minor 18.36 on the downside. A break under this level and the VIX should continue lower. 19.14 should be resistance.
SPX:
Minor level: 2,805.20
Major level: 2,793.00
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
As I mentioned, the S & P 500 hit the 2,744.10 level. The market moved two levels in 3 days.
Yesterday's close percentage was 100%, so the odds heavily favor the violation for the high before the low.
And with the strength of yesterday's daily bar this adds more credence to this statement.
Likely support for today could be at 2,724.60 level. And at the minor 2,727.10 level.
QQQ:
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 168.70. It closed 5.26 points higher. This was a move of 3.22%.
The QQQ essentially hit the 168.75 level.
Minor support should be at 165.63 and 167.19. 171.88 is minor resistance.
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 also closed higher on the day. It closed at 152.24, up 2.47% on the day.
With a close above 151.56 today, the objective becomes 156.25.
150.78 is minor support. 154.69 is minor resistance.
152.55 is technical resistance. If the IWM can clear this level, expect it to head higher.
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
Minor level: 112.11
Minor level: 111.33
Major level: 110.94
The TLT closed at 114.45. It closed exactly on the minor level.
Short term charts remain bullish, implying the TLT should find support and make another run.
The TLT moved up two levels off the low, which is a normal countertrend move in a bear market.
Look for a drop to 114.06. And watch to see if the TLT breaks under it. If it does, expect it to head lower.
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 115.38. The major 115.63 level should still be resistance. The GLD would need two closes under 114.85 to drop to 112.50.
The GLD is trading around the midband on the 60 minute chart. That level is 114.45. Watch to see if this level holds as support or resistance.
I am biased for a move back down to the lows.
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 65.80. The XLE reclaimed the 65.63 level. The XLE is oversold and trying to bounce.
65.23 is now minor support.
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 84.08. The low came within 20 cents of the 83.59 objective.
As I said, the recent upmove has been a bounce in a bear market.
84.18 should be minor resistance. And 84.38 as well. Biased for a move down.
AAPL:
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
Minor level: 185.94
Minor level: 182.81
Major level: 181.25
Minor level: 179.69
Minor level: 176.56
Major level: 175.00
I mentioned how I was looking for some consolidation at the bottom to confirm that Apple was bottoming out.
And yesterday was the 4th day of that consolidation and it exploded to the upside. It was up $6.70 on the day.
If Apple does pullback here, it could be a chance to get long.
178.13 should offer support. And 187.50 should be resistance.
WATCH LIST:
Bullish Stocks: CLX, UHS, LLY, KMB, UAL, DUK, OMCL, BKH, DAL, FL
Bearish Stocks: BKNG, GOOGL, BA, DIA, GS, FLT, BIDU, NVDA, FB, RACE, OLED, EA, SWKS, WLK, GILD
Be sure to check earnings release dates.