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Is this bull market over?
That is the question on everyone's mind right now. And in my opinion, we have violated some major levels of support.
And we are approaching some key levels that should tell us if this downleg should go lower.
I will outline what these key levels are.
The first, of course, which is the major one I review on each webinar, is the upper band on the monthly chart for the S & P 500. The upper band is now 2,718.77 and yesterday closed at 2,656.10, or about 62 points under that level.
This is the first breach of the upper band in about 3 years.
As I have said, a monthly close under the upper band would be bearish. We have 5 trading days left in the month to recover 2,718.77.
But, with a breach of the upper band, I would expect resistance at that level.
The other major support level that was violated yesterday was the midband on the daily chart. That level is 2,739.53.
Now that it has been violated, it should act as resistance.
Often after breaking the midband, price will continue to the lower band, which is 2,487.62.
Finally, the next major resistance level is 2,646.50.
This is a key level. And if the S & P 500 has two closes under 2,646.50, I would expect the market to continue lower. Most likely to 2,549 and possibly to 2,500.
The 2,500 objective is not far from the lower band.
The market will have counter trend bounces. And usually, they are sharp. They are designed to suck you in long before the market turns and heads back down.
Just be aware of this.
For the market to turn, I would want to see another selling climax. We have had one in this downleg and yesterday the down to up volume was 6.7, not quite qualifying for a climax.
The factor that can predict a turn is the lower bands on the 60 minute chart.
The market broke under the lower band on the 11th and bounced back after that. Now yesterday, it closed back under the lower band. The lower band on the 60 minute is 2,688.65.
This tells us that the market should retest the lower after it moves back inside the bands.
Just a final comment about yesterday's price action.
The close percentage on Tuesday was 79%. That meant there was about an 80% that the high should have been violated before the low.
And when the S & P 500 took out Tuesday's low of 2,691.43, it was a sign that the market should head lower. And from that point, the S & P 500 dropped another 40 points.
And speaking of yesterday's bar, it certainly qualified as a long range bar. The range for the day was 90.70 points. The average true range is 41.16, so the range yesterday was over twice the average.
This suggests there should be strong resistance in the 2,697 area.
Pre open, the S & P 500 is set to open about 28 points higher. Based on this projected open, it would still be about 4 points under the lower band on the 60 minute chart.
Watch to see if the market can recoup the lower band.
This afternoon we will hear from GOOGL, AMZN, CMG, and BIDU. Some positive news would help to stem this selling.
These reports will be closely followed.
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 25.23. This was the first close above 25 in quite a long time.
At this point, resistance is at 28.13 and the upper band, which is 25.95.
The VIX has moved two levels and the S & P 500 has dropped 6 levels off the top.
A turn to bear market would be indicated if the VIX ran to 31.25.
SPX:
Minor level: 2,829.60
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
At this point, 2,695.30 should offer strong resistance. For this sell off to stop, the market would need to close above 2,695.30.
And you know the implications of a close under 2,646.50.
Resistance should also be at 2,744.10.
QQQ:
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
Minor level: 164.06
Major level: 162.50 <
The QQQ closed at 165.34. This now implies that if the QQQ can close under 167.19 today, it should drop to 162.50.
Similar to the S & P 500, the QQQ closed under the mid band on the daily chart. The midband is 167.89 and it should now be resistance.
168.75 is a key level for the QQQ, similar to the 2,646.50 level for the S & P 500. If the QQQ closes under 168.75 today, it could drop to 150.
171.88 should be short term resistance. Also, 169 should offer technical 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 closed at 145.95. 150 should be resistance now for the IWM.
Key level for IWM is 143.75. Two closes under 143.75 and the IWM could drop to 125.
The 149 - 150 area should be strong resistance.
The lower band on the 60 minute is 146.25. Technical resistance is at 164.
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 114.78. A close above 114.45 and the TLT should test 115.63.
The TLT would have to move up to 117.19 for the downtrend to be over.
115.23 is minor resistance.
GLD:
Major level: 117.19
Minor level: 116.80
Minor level: 116.02 **
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 116.66. 115.63 should now offer support.
Technical resistance is at 121. And technical support at 114.
XLE:
Major level: 78.13
Minor level: 77.35
Minor level: 75.78
Major level: 75.00
Minor level: 74.22
Minor level: 72.66
Major level: 71.88 **
Minor level: 71.10
Minor level: 69.53
Major level: 68.75 <
The XLE closed at 66.17. 67.20 should be resistance.
The 68.75 level should offer resistance.
A close today under 67.19 and the XLE should drop to 62.
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 85.23. Two closes above 85.36 and the FXY should test 85.94.
85.06 should offer minor support.
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 215.09. It gave back the gains from Tuesday.
Watch to see if Apple can regain the 217.19 level. If it can, it should head higher. If not, expect it to head lower.
WATCH LIST:
Bullish Stocks: ANTM, CME, LH, AWK, WBA, WBA, LW, PEG, CNK, NYT, DAR, TDS
Bearish Stocks: BIDU, GD, MLM, BABA, IBM, ITW, RHT, RCL, WYNN, SWKS, ALNY, WLK, SINA, CCL, SLB, MNST
Be sure to check earnings release dates.