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.
CURRENT POSITIONS:
GOGO Long at $19.93
Total Premium Collected $1.95
ASNA Long at $14.20
Total Premium Collected $0.75
DUST Long $4.50
Total Premium Collected $0.70
RRC Long at $11.85
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RRC Long at $9.20
RIG Long at $8.81
Premium Collected - $1.45
FEYE Long at $17.18
Total Premium Collected $0.80
FDX Long Nov 22nd- $157.50 Call at $1.25
FDX Short Nov 22nd - $160 Call at $0.55
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Yesterday, the S & P 500 closed marginally lower. It closed the day out at 3,120.18, down 1.85 points on the day.
The high for the day was 3,127.64. This put the S & P 2.64 points above the 3,125 objective we have been calling for.
And once again, we had another range contraction. The range for the day was only 14.17 points. And with the daily average true range reading 20.80 points, the daily range was only 68% of the average.
Add in the fact that the day closed out with another doji bar and it adds to major concerns that a pullback should be forthcoming.
The most alarming aspect of the recent price action is the contraction of the daily average true range.
The 20.80 point average is the lowest this market has seen since the 21.20 point average on July 30th.
I bring this up because when the market contracted back in July, it signified a short term top for the market.
In fact, two days prior on July 26th, the market topped out at 3,027.98.
Six days later, the S & P traded at 2,822.12. So, in six days, the S & P dropped 205.86 points.
Can this happen again?
My answer to this is why not?
The market is clearly overbought at this time. But, that does not mean the market will turn on a dime. In fact, back in 2000 when the tech stocks were in a bubble, the market just kept running. The traders who got wiped out were the ones that continued to short the market as it climbed.
The market is designed to fool most of the people most of the time.
But, the reality is that back in July, the market did turn on a dime and dropped over 200 points in about a week.
The question is how do we position ourselves in the event this happens again?
To me, the simple way to do this is to put on an unequal straddle with a bias to the downside.
The support area for today should be in the 3,120 to 3,124 area.
The support from last week's weekly price bar, which is in the 3,098 to 3,100 area should still be valid support.
TGT reported and is trading about $11 higher after reporting.
And JWN and ROST report tomorrow after the close.
Here are the Key Levels for the Markets:
$VIX:
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 <
Minor level: 11.72
Minor level: 10.16
Major level: 9.38
The VIX closed out at 12.85 yesterday. The VIX closed back above the major 12.50 level.
At this point, 12.50 should be support. And watch the 13.28 level on the upside.
If it can close above this level, it should continue higher.
11.72 is a support level on the downside. If the VIX breaks under it, I would expect a test of 9.38.
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 3,120.15. With a close under 3,125, look for resistance at that level.
And with a projected open about 8 points lower, the market should open just under yesterday's low which is 3,113. Watch to see if the market can bounce and get above the low. If it can, it should run up to the 3,120 area.
3,115 should be a minor support level. And 3,134 could offer resistance on the upside.
Technical support is around 3,105.
QQQ:
Minor level: 203.91
Major level: 203.13 HIT
Minor level: 202.35
Minor level: 200.78
Major level: 200.00
Minor level: 199.22
Minor level: 197.77
Major level: 196.88
Minor level: 196.10
Minor level: 194.53
Major level: 193.75
The QQQ closed at 203.37. Like the S & P hitting the 3,125 objective, the QQQ hit the 203.13 objective.
The next minor level on the upside is 203.91. And on the downside, it is 202.35.
Technical support should be around the 202 area.
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 159.11. The target for the IWM should still be to the 162.50. Still lagging the SPX and the QQQ.
The IWM continues to hold the minor 157.81 level. If the IWM does break under this level, I would expect strong support at 156.25.
159.38 is a minor resistance level. The IWM needs to clear this level to move higher. Watch this level again today. If the IWM cannot clear it, it would signal we should see a pullback.
And 157.81 should still offer support. And technical support is around 158.
TLT:
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 **
Minor level: 132.81
Major level: 131.25
The TLT closed at 139.16. The TLT bounced just above 137.50.
The TLT will need to close above 138.28 today to move up to 140.63.
Short term charts remain bearish.
And the 139 to 140 area should still offer technical resistance.
GLD:
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
Major level: 134.38
The GLD closed at 138.69. The target should be up to 140.63.
The key level is 134.38 on the downside. If the GLD has two closes under this level, it could drop to 125.
Short term, there is technical resistance at 140. And technical support is around 136.
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 58.47. This was the first close under 58.60 which implies that if the XLE can close under 58.60 today, it should drop to 56.25.
Momentum has shifted to the downside.
The 58 area should offer technical support.
AAPL:
Major level: 281.25
Minor level: 277.35
Minor level: 269.54
Major level: 265.63 HIT!
Minor level: 261.72
Minor level: 253.91
Major level: 250.00
Minor level: 246.88
Minor level: 240.63
Major level: 237.50
Apple closed at 266.29. At this point, the major 265.63 level should offer support and yesterday's low was 265.39.
Apple will have to drop under the major 265.39 level to pullback.
Apple will need two closes above 269.54 to move up to 281.25.
The upper band is now 267.07. This should now be support until it closes under it.
Technical support should be in the 263 area.
WATCH LIST:
Bullish Stocks: GOOGL, CHTR, LMT, HUM, SPY, COST, ADBE, AMGN, VRTX, QQQ, OLED, FB, GD, V, KLAC, ADP, DECK, ROKU
Bearish Stocks: AAP, ADS, TAP, IRBT, NUS, OXY, GOOS, NTGR, EBIX
Be sure to check earnings release dates.
