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 selling onslaught followed through yesterday with another long-range candle.
For the day, the S & P 500 closed 52.64 points lower. The day closed out at 2,887.61. The intraday range was not quite as large as Tuesday, but it still was 144% of the daily average true range.
Yesterday's intraday range was 49.85, as compared with Tuesday's range of 53.83.
So, in two days, the S & P gave up 89 points.
This is why they say the markets take the escalator up and the elevator down.
And with a close percentage of 25%, the odds favor the low being violated before the high. But, short term, the market is oversold.
We know this by simply looking at the 30 minute chart for the S & P and seeing that it is trading under the lower band on the 30 minute chart.
The lower band on the 30 minute chart is 2,910.41 and the close was 2,887.61. So, you can see that the market is about 23 points under the lower band.
This does tell us two things.
The first is that a bounce should be expected and the second is that a retest is highly likely.
Of course, when I mention a retest, this is a sell-off back to the lower band after price trades back inside the bands.
And speaking of bands, I mentioned how a test of the midband on the daily chart is likely. The midband is 2,817 and yesterday's close is now within 70 points of it.
Actually, yesterday's low stopped virtually on the 200 ema. The 200 ema is 2,874.36 and the low was 2,874.93.
This is also a level of support and the last three bottoms all stopped at the 200 ema.
The only difference between the bottoms in August and now is that fact that there were three selling climaxes as the market bottomed.
And at this point, we have not seen one, which to me, suggests that this selling is not over.
I typically look for selling climaxes to signal the end of the selling pressure. A selling climax is when the down to up volume is 9 to 1 or greater.
And Tuesday's reading was 4.89 and yesterday's was 4.07. So, you can see that we are not even close to a climax.
The resistance level from yesterday's daily bar is in the 2,900 to 2,906 area.
Here are the Key Levels for the Markets:
$VIX:
Major level: 25.00
Minor level: 24.22
Minor level: 22.66
Major level: 21.88
Minor level: 21.10
Minor level: 19.53
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
The VIX closed at 20.46 yesterday. Yesterday's low was exactly 18.75.
Like the S & P trading under its lower band on the 30 minute chart, the VIX is trading above the upper band on its 30 minute chart.
A bounce in the market will not happen until the VIX moves back inside the upper band. This is the key short term indicator to time the bounce.
A close today above 19.53 would suggest a move up to 21.88.
18.75 should be support. A move up to 25 is highly possible.
SPX:
Minor level: 3,164.08
Major level: 3,125.00
Minor level: 3,085.95
Minor level: 3,007.85
Major level: 2,968.80
Minor level: 2,929.73 **
Minor level: 2,851.58
Major level: 2,812.50
Minor level: 2,773.45
Minor level: 2,695.35
Major level: 2,656.30
The S & P closed at 2,887.61. With a close today under 2,929, the S & P should drop to 2,812.50.
There is also a short term level at 2,880.90. Two closes under this level and the S & P should drop to 2,807.
But, it is support until violated.
QQQ:
Major level: 196.88
Minor level: 196.10
Minor level: 194.53
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
The QQQ closed at 184.05. A close today under 185.94 and the objective should be to 181.
185.94 should be resistance. Like the S & P, it is trading under the lower band on the 30 minute chart. That level is 184.42.
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 147.25. The midband which is 150.39 should be resistance.
148.44 should be resistance. And a close under this level and the IWM should drop to 143.75.
TLT:
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75 <
Minor level: 142.97
Minor level: 141.41
Major level: 140.63
Minor level: 139.85
Minor level: 138.28
Major level: 137.50
Minor level: 135.84
The TLT closed at 143.61. The TLT is now trying to hold the 143.75 level.
The TLT will need to clear 143.75 to head higher.
And 144.53 should offer minor resistance. Minor support is at 142.58.
Watch to see if the TLT can clear the 143.75 level. If it can, it should continue higher.
GLD:
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
Minor level: 142.97
Minor level: 141.41 **
Major level: 140.63 <<
Minor level: 139.85
Minor level: 138.28
Major level: 137.50
Minor level: 136.72
Minor level: 135.16
The GLD closed at 141.26. At this point, the GLD will need two closes above 141.41 to head higher.
The major 140.63 level should be support.
Watch the technical level at 141.
XLE:
Minor level: 63.28
Major level: 62.50
Minor level: 61.72
Minor level: 60.16
Major level: 59.38
Minor level: 58.60
Minor level: 57.03
Major level: 56.25 <<
Minor level: 55.86
Minor level: 55.08
Major level: 54.69
The XLE closed at 56.41. A close today under 58.60 and the XLE should drop to 56.
The major 56.25 should offer technical support. The XLE is oversold in the short term as well. The lower band on the 30 minute is 56.61.
AAPL:
Major level: 225.00 <
Minor level: 221.88
Minor level: 215.63 **
Major level: 212.50 <
Minor level: 209.38
Minor level: 203.13
Major level: 200.00
Minor level: 196.88
Minor level: 190.63
Major level: 187.50
Minor level: 184.38
Apple closed at 218.96. A close today under 221.88 and Apple should test 212.50.
The 212.50 area should offer support. A break under this level and Apple should head lower.
WATCH LIST:
Bullish Stocks: MLM, AAPL, NSC, RH, RH, AGN, KLAC, ITW, IBM, UTX, KSU, PG, PSX, NXPI
Bearish Stocks: NFLX, REGN, HUM, UNH, VRTX, MOH, BMRN, GRUB, GDOT, ALKS
Be sure to check earnings release dates.
