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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Friday closed out the month of May with a very bearish month. For the month, the S & P 500 closed 193.77 points lower.
And to make the bearish scenario even worse, the range for the month was 215 points. This was 131% higher than the monthly average true range of 164 points.
An expansion in the range with a lower close is bearish.
The monthly price bar closed out at just 0.7% of the range of the monthly bar. This puts the odds of violating the low before the high at almost 100%.
The key resistance levels from the May monthly bar is in the 2,852 to 2,858 area.
With a close at 2,752.06, the S & P 500 could rally 100 points before resistance even comes in.
And the other bearish factor from the May monthly chart is that it closed almost 100 points under the upper band.
The upper band is now 2,866.62 and the month closed at 2,752.06. As you know, this is bearish and the upper band should also offer resistance.
The weekly price bar was also decidedly bearish. The S & P 500 closed the week 74 points lower. Like the monthly price bar, the weekly price bar also expanded. The range for the week was 120% of the weekly average true range.
The resistance level from the weekly price bar is in the 2,791 to 2,795 area.
If we scope down to take a look at the daily chart, we see another bearish factor. Last Friday, the S & P 500 closed decidedly under the midband in the daily chart.
The S & P 500 spent two days trying to hold the midband, and finally broke under it Friday.
The midband now reads 2,777.04 and should be resistance.
As a point of reference, I do need to mention that the lower band on the daily chart is 2,489. Typically, when the midband is violated, the next price target is to the lower band.
The sentiment indicators I follow are all reading about 50%. These levels are not even close to being oversold.
I suspect the only bullish comment I can make is that the daily chart for the S & P 500 is clinging to an uptrend. The 200 ema is 2,776.91 and the 253-day average is 2,776.49. So, you can see how close they are.
Short term the S & P 500 is oversold. The lower band on the 60 minute chart is 2,752 which is right where the market closed Friday.
The lower band on the 30 minute is 2,736, so there could be further downside before the 30 minute is oversold.
And with both the 30 & 60 minute charts bearish, shorting rallies will be the most profitable strategy. That is, of course, after the market can bounce from an oversold condition, which it will.
Earnings season is coming to an end. The most notable company reporting is Salesforce which reports tomorrow after the close.
Pre open, the S & P 500 is trading about 8 points lower. This projects to an open under Friday's low.
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
The VIX closed Friday at 18.71. The print on Friday right after the close was 18.75.
The next minor level on the upside is 19.53. Two closes above that level and the VIX should move up to 21.88.
20.31 should offer resistance on the upside.
SPX:
Major level: 2,968.80
Minor level: 2,949.25
Minor level: 2,910.15
Major level: 2,890.60
Minor level: 2,871.08
Minor level: 2,832.03
Major level: 2,812.50
Minor level: 2,792.98 **
Minor level: 2,753.93
Major level: 2,734.40 <
Minor level: 2,714.88
Minor level: 2,675.83
Major level: 2,656.30
Target should be to 2,734.40. And Friday closed just under the minor 2,753.93 level, which should now be resistance.
If 2,734 cannot hold as support, a drop to 2,656 is imminent.
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 <
Minor level: 173.44
Minor level: 170.31
Major level: 168.75
Minor level: 167.19
The QQQ stopped at 173.95. 175 is resistance now. And Friday's high was only 29 cents above it.
And like the S & P 500, the QQQ closed under its midband on the daily chart.
The midband is 174.14. And it should now be resistance.
A break under 173.44 and the QQQ should head lower.
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 145.86. Look for a move down to 143.75.
At this point, if the IWM closed under 146.88 today, it should drop to 140.
Watch this level. The IWM is oversold. It is sitting right at the lower band on the 60 minute.
The lower band on the 60 minute chart is 146.14.
TLT:
Major level: 134.38
Minor level: 133.60
Minor level: 132.03 **
Major level: 131.25 < HIT
Minor level: 130.47
Minor level: 128.91
Major level: 128.13
Minor level: 127.74
Minor level: 126.95
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
The TLT closed out at 131.83. The 131.25 target was hit.
At this point, the next key level on the upside is 132.03. Two closes above that level and the TLT should test 134.
But, the TLT is overbought in the short term.
It is above the upper band on the daily 60 and 30 minute charts. This is unsustainable and I would expect a pullback.
Wait for a close under the upper band on the 30 minute chart which is 131.53 before initiating a short.
128.13 should now be minor support.
GLD:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00
Minor level: 124.22
Minor level: 122.66
Major level: 121.88 < HIT
Minor level: 121.49
Minor level: 120.70
Major level: 120.31
Minor level: 119.92
Minor level: 119.14
Major level: 118.75
The GLD closed at 123.33. The GLD took out the 121.88 target. A close today above 122.66 and the TLT should test 125.
124.22 is minor resistance. But, if it clears this level, it should continue higher.
XLE:
Major level: 65.63
Minor level: 64.85
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: 55.47
Minor level: 53.91
Major level: 53.91
The XLE closed at 58.77. Watch the key 59.38 level today. A close today under 59.38 and the XLE could drop to 50.
The XLE is close to a major level.
Short term support is at 57.81. If the XLE drops under this level, expect it to head lower.
AAPL:
Minor level: 203.13
Major level: 200.00
Minor level: 196.88
Minor level: 190.63
Major level: 187.50
Minor level: 184.38
Minor level: 178.13 **
Major level: 175.00 <
Minor level: 171.88
Minor level: 165.63
Major level: 162.50
Apple closed at 175.07. Apple hit the 175 objective I have been calling for. Friday's low was 174.99.
Still biased for a bounce at 175. If it can bounce, I would expect a move up to 187.
WATCH LIST:
Bullish Stocks: CME, GPN, HSY, TLT, ELS, CBOE, GWR, ICE, BAH
Bearish Stocks: AMZN, GOOGL, REGN, ALGN, HD, ASML, RTN, GD, FDX, MMM, NVDA, JAZZ, BLUE, CAT, CXO, FANG
Be sure to check earnings release dates.
