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.
GOGO Long at $19.93
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ASNA Long at $14.20
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OI Long Feb $19 call @ $1.70
OI Short Feb $22 call @ $0.55
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Last week saw the biggest selling pressure in quite a long time. All major markets sold off, with the NASD market leading the way.
The NASD Composite was down 257.91 points for the week or 3.21%.
And the QQQ was down 5.64 points of 3.04%.
The DOW loss of .04% and the S & P 500 loss of .97%, seem modest compared to the NASD losses.
But, the real question is where do we go from here?
First, lets look at the weekly bar for the S & P 500.
The weekly bar closes at 23.1% of the range. This puts the odds of violating the low before the high at almost 80%.
Last week's low was 2,869.29 and with a close at 2,885.57, there is about a 16 point drop to test the low.
And the range for last week was 70.57 points, as compared with the weekly average true range of 52 points.
This tells us that the selling pressure is strong and I would expect a follow through this week.
Resistance from last week's weekly bar is in the 2,904 to 2,906 area.
Scaling down to the daily chart, we see that the daily chart has a second consecutive day of expansion.
You often read about expansions and contractions. This is because it is probably the most predictable thing about the markets.
You know that an expansion should follow a contraction and usually a contraction will follow an expansion.
It's almost like the market is counter balancing an overextended move, or a move under the norm.
Preceeding this sell off, there were two consecutive contractions on September 24th and 25th.
The next contraction came on October 2nd. There was also a contraction on September 29th.
So, in the last two weeks of trading, there were four contractions.
And Thursday and Friday both expanded. The total range for those two days were about 76 points.
Friday's daily bar closed at 40% of the daily range. This suggests that there is roughly a 60% chance that Friday's low will be violated before the high.
Resistance from Friday's bar is in the 2,889 to 2,894 area.
Watch these levels on a rally.
I mentioned Friday that resistance for that day should be "in the 2,902 to 2,910 area."
Friday's high came in at 2,909.64 or right at the upper end of the resistance level I mentioned Friday morning.
Congratulations if you caught the high of the day on Friday and rode the market down.
Pre open, the S & P 500 is trading about 7 points lower.
Watch the resistance levels I mentioned above and Friday's low of 2,885.57.
Here are the Key Levels for the Markets:
$VIX:
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
Minor level: 10.94
Minor level: 7.81
Major level: 6.25
The VIX closed at 14.98. At this point, I would expect a test of 18.75.
14.06 should offer support, as well as 12.50. Watch to see if the VIX can clear 15.63.
SPX:
Major level: 2,988.30
Minor level: 2,976.10
Minor level: 2.951.70
Major level: 2,939.50
Minor level: 2,927.28
Minor level: 2,902.83
Major level: 2,890.60
Minor level: 2,878.40 **
Minor level: 2,854.00
Major level: 2,841.80 <
At this point, 2,902.83 should offer resistance. And the major level on the downside should be 2,744.10. A break under 2,744.10 and the S & P 500 should test 2,695.30.
The S & P 500 could drop to the 2,841.80 level without affecting this bull trend.
A drop lower would make me concerned that a larger down swing could be coming.
Technical resistance is at 2,910.
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
The QQQ closed at 180.15. The QQQ closed one cent above the minor 185.94 level.
I do feel that strong support should come in at the 175 level. Two closes under 179.69 and the 175 should be tested.
Both 30 minute chart and the 60 minute charts are still bullish. Technical resistance is still at 184.
And technical support is at 179.
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
The IWM closed at 162.16. The IWM did break under the major 162.50 level.
If it can't I would expect a drop to 156.25. And I would expect strong support at this level.
164.06 is a short term resistance level.
The IWM is the only index still in downtrends on the 30 and 60 minute charts.
The IWM is trading under the lower bands on both the 30 and 60 minute charts. Short term oversold and a bounce should be forthcoming.
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 continues its free fall and closed at 113.04. Short term, the TLT is oversold and could bounce. We know that because it is trading under its extreme band on the daily chart. That level is 113.09.
A close today under 113.67 and 112.50 should be the objective.
Short term charts remain bearish. Technical resistance is at 117.
The TLT is sitting at the bottom band on the 30 minute, which is 113.01.
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 113.80. 112.50 should offer strong support. But if the GLD breaks under 112.50, it could drop to as low as 100.
Watch the 112.50 level today.
Minor resistance should be at 114.06.
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 77.16. The XLE is within 50 cents of the 78.13 level.
If the XLE can close above 78.13 for two days, it should move up to 87.
75 should be strong support.
Both short term charts are in uptrends. Technical support is at 74 and 75.40.
FXY:
Minor level: 84.97
Minor level: 84.58
Major level: 84.38
Minor level: 84.18
Minor level: 83.79 **
Major level: 83.59 <
Minor level: 83.40
Minor level: 83.01
Major level: 82.81
The FXY closed at 84.10. A close today above 83.60 and the FXY should bounce up to 84.38.
The FXY is oversold. On the downside, I do not expect the FXY to break under 82.81.
If the FXY can reclaim the 84.38 level, it should consolidate before heading higher.
Short term charts remain bearish. Technical resistance is right at 85.50.
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 224.29. Watch the 223.44 level on the downside. Two closes under 223.44 and Apple should drop to 218.
Apple could drop to 212.50 without affecting its uptrend.
Short term charts remain bullish. Technical support is at 222.
WATCH LIST:
Bullish Stocks: AMZN, REGN, ALGN, NFLX, BA, FLT, MA, ADBE, EW, ADP, V, ALXN, FANG, PTC, DIS, SQ, ESRX, XLNX, WBA
Bearish Stocks: FDX, GS, MLM, LRCX, WYNN, SMH, KLAC, ALL, ALNY, JACK, PRGO, MNST, KHC, WRK
Be sure to check earnings release dates.