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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I admit that I rarely get too excited anymore when I see market action, but yesterday was anything but exciting.
Rarely do we see a market melt up. And that is what we got.
We were expecting a market bounce because of how oversold the market was, but this move certainly exceeded any projection I would have had.
As I have said many times before, we can predict turning points with a pretty decent degree of accuracy, but the extent of the move is always the most difficult thing to determine.
As for why we were expecting a bounce in the market, there were a few factors that suggested the market would bounce.
From a technical standout, the S & P 500 was sitting right on the lower band on both the 30 minute and 60 minute charts.
And last in the day on Monday, tremendous volume came in. And it came on a bullish close. I will show these charts in today's webinar.
I mentioned yesterday that the sell-off on Monday seemed rather orderly. In fact, the market came back late in the day to form a doji bar. The other fact about Monday was that we did not get a huge spike in the VIX. In fact, the VIX was contained around the 18.75 level.
For a larger down move to occur, I would have expected the VIX to move higher than 18.75.
The final fact about this down leg was that the move went two levels.
As I have mentioned on many occasions, a normal pullback usually moves two levels. A three-level move would make me suspicious that a change in sentiment would happen.
For the day, the S & P 500 closed 58.82 points higher. It closed at 2,803.27.
And for the day, it closed at 97% of the daily range. This suggests that the high will be violated before the low.
And with the S & P 500 trading about 14 points higher in the pre market, the market should take out yesterday's high of 2,804.49 at the open.
This assumes that this trading will continue until the open.
The support area from yesterday's daily bar is in the 2,783 area.
Today is our regularly scheduled webinar. I hope to see you at the webinar at 12:00 pm EST.
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 yesterday at 16.97. This was a drop of 1.74 or 9.3%.
The high for the day was 18.74, just a penny under the major level.
At this point, if the VIX closes under 17.97 today, it should drop to 12.50.
Minor support is at 15.63 and 16.41.
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 < HIT
Minor level: 2,714.88
Minor level: 2,675.83
Major level: 2,656.30
After hitting the downside target of 2,734.40, the S & P 500 is almost back to the 2,812.50 level in one day.
Assuming the pre market trading holds up through the open, the S & P 500 should take out the 2,812.50 level right at the open.
If the S & P 500 can clear 2,182.50, it should be support. If the market does pull back, I would expect support at the minor 2,802.70 level.
On the upside, resistance could come in around 2,830.
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 174.91. The QQQ stalled at 174.97 yesterday. If the QQQ takes out 175, look for support at that level.
173.44 should offer support.
And like the S & P 500, the QQQ closed above its midband which is now 174.17.
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 150.16. Look for a move down to 143.75. If the IWM can close above 150 again today, I would expect a move higher.
146.88 should offer support.
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 130.93. It closed under the major 131.25 level. To move lower, the TLT will need two closes under 130.47.
Yesterday, I mentioned that I was "just waiting for the plug to get pulled."
The move yesterday suggests we may see a top. But, I would expect the TLT to bounce around a bit before it moves lower.
Also, it needs to close under the upper band on the daily chart which is 129.57.
132.82 should offer minor resistance. And 128.91 should offer support.
GLD:
Major level: 126.56
Minor level: 126.17
Minor level: 125.39
Major level: 125.00 < Hit
Minor level: 124.22
Minor level: 122.66
Major level: 121.88
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 125.15. The GLD is overbought and I would expect a pullback.
To move lower, the GLD will need two closes under 124.22.
126 minor resistance.
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 60.55. A close today above 60.16 implies a move up to 62.50.
If the XLE takes out 60.94, I would expect it to head higher. 59.38 should now be support.
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 179.64. A close today above 178.13 and Apple should move up to 187.50.
175 should now be support. Look for an entry to go long.
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.
