June 18, 2020 - MDT Pro Tips

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.

Yesterday, the S & P 500 took a pause and contracted. The day closed a modest 11.25 points lower. The day closed out at 3,113.49.

The S & P essentially traded around the major 3,125 level all day. I think for about a 3 hour period it basically traded right on the line.

Then it made a little run to the high of 3,141.16. After hitting the high, it dropped to the close.

So, the day ended up as an inside day, with a lower high and a higher low. And the range ended up being 33.13 points. This was less than one half the daily average true range which is 79.95 points.

This contraction and inside bar should lead to an expansion. The question is when?

Yesterday was the second consecutive contraction for the S & P. The last expansion followed 10 days of contractions.

And the prior expansion followed 7 days of contractions. A contraction is any day that does not equal or exceed the daily average true range.

Support from yesterday's daily bar is in the 3,125 area, which also happens to be the major level.

The key for the short term will be to see if the S & P can hold the 3,125 level. And the 3,125 level is very close to the high of the bearish long-range candle from Thursday, June 11th, which happens to be 3,123.53.

A close above the high of the bearish long-range candle would be bullish.

The key levels for today are the 3,125 / 3,123.53 level on the upside and the midband on the downside, which is 3,001.

At this point, the midband should now be support because the market tested it and it held.

Also, there is the resistance levels from last week's weekly price bar. These levels are 3,120 and 3,109.

So, there are quite key price levels for the market to navigate today. And if all these key levels are not enough to think about, let me add that both the S & P and the VIX closed to the downside.

This, as you know is a divergence. The last time they both closed down, the market closed higher the next two days.

I am still biased to the upside because the 60 minute chart is still bullish. And the shorter term 10 minute chart just crossed into an uptrend.

Pre open the S & P is trading about 25 points lower. This projects to an open around 3,088 or about 20 points under yesterdays low. 3,079 is also a support level on the downside.

For the market to reverse to the upside, the VIX needs to reverse to the downside.

Here are the Key Levels for the Markets:

$VIX:

Major level: 37.50
Minor level: 36.72
Minor level: 35.16 **
Major level: 34.38 <
Minor level: 33.60 **
Minor level: 32.03
Major level: 31.25
Minor level: 30.47
Minor level: 28.91
Major level: 28.13
Minor level: 27.35
Minor level: 25.78
Major level: 25.00
Minor level: 24.22

The VIX closed at 33.47. It closed .20 lower on the day.

This was the first close under 33.60. So, a close today under this level and the VIX should drop to 31.25.

On the upside, I would expect resistance at the 35.16 level.

Wait for the VIX to reverse to the downside, before initiating any longs.

Technical resistance is around 35.

S & P 500:

Major level: 3,281.20
Minor level: 3,242.15
Minor level: 3,164.00
Major level: 3,125.00 <<
Minor level: 3,085.95
Minor level: 3,007.85
Major level: 2,968.80
Minor level: 2,929.75
Minor level: 2,851.65
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 3,113.49. The S & P projects to open around 3,088 or about
2 points above the minor 3,085.95 level.

The minor 3,085.95 level should be support. Watch to see if the market can hold this level. If it can't, then the market should head lower.

Technical support is around 3,102.

QQQ:

Major level: 250.00
Minor level: 248.54
Minor level: 245.31 **
Major level: 243.75 < Hit
Minor level: 242.15
Minor level: 239.00
Major level: 237.50
Minor level: 235.91
Minor level: 232.78
Major level: 231.22
Minor level: 229.66
Minor level: 226.56
Major level: 225.00

The QQQ closed at 243.62. Yesterday's high got to 245.50, to just above the next minor level, but could not hold it.

Support should be at the minor 242.15 level. And the QQQ will need two closes above 245.31 to move higher. And two closes under 242.15 to move lower.

Support from yesterday's bar should be around 243.

The QQQ is almost at the upper band on the daily chart. The upper band is now 248.59.

Technical support is around 240.

IWM:

Major level: 156.25
Minor level: 154.70
Minor level: 151.56
Major level: 150.00
Minor level: 148.44
Minor level: 145.31
Major level: 143.75 <
Minor level: 142.19 **
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
Major level: 131.25

The IWM closed at 141.77. This was the first close under the minor 142.19 level. A close today under this level and the IWM should drop to 137.50.

Yesterday, the IWM could not follow through and break through the midband on the daily chart. The high on Tuesday was 146.69 and the midband is 146.89.

On the downside, if the IWM cannot hold 135, then I would expect it to drop farther.

TLT:

Major level: 165.63
Minor level: 164.85
Minor level: 163.28
Major level: 162.50
Minor level: 161.72
Minor level: 160.16 **
Major level: 159.38 <
Minor level: 158.60
Minor level: 157.03
Major level: 156.25
Minor level: 155.47
Minor level: 153.91
Major level: 153.13

The TLT closed at 160.56. The TLT will need to close above 160.16 to head up to 162.50.

A drop under this level and the TLT should head lower.

At this point, resistance should be at the 162.50 level.

The TLT is in a downtrend on the 60 minute chart. Resistance should be at the 163level.

GLD:

Major level: 165.63
Minor level: 164.85
Minor level: 163.28
Major level: 162.50 < Hit
Minor level: 161.72
Minor level: 160.16
Major level: 159.38
Minor level: 158.60
Minor level: 157.03
Major level: 156.25
Minor level: 155.47
Minor level: 153.91
Major level: 153.13

The GLD closed at 162.56. The GLD closed just above the major 162.50 level again. Watch this level again today.

At this point, watch the 163.28 level on the upside and 161.72 on the downside.

Technical support should be at 161. A break under this level the GLD should continue lower.

XLE:

Minor level: 47.65
Major level: 46.88
Minor level: 46.09
Minor level: 44.53
Major level: 43.75
Minor level: 42.97
Minor level: 41.41
Major level: 40.63 <
Minor level: 39.83 **
Minor level: 38.28
Major level: 37.50 <
Minor level: 36.72
Minor level: 35.15
Major level: 34.27

The XLE closed at 39.69. The XLE closed under the 39.83 level. A close today under this level and the XLE should drop to 37.50.

The XLE will need to close above 39.69 to move higher.

The midband on the 60 minute chart is now 39 and the XLE is just above it. This should now be support. A break under it and the XLE should head lower.

AAPL:

Major level: 362.50
Minor level: 359.38
Minor level: 353.13 **
Major level: 350.00 < HIT
Minor level: 346.88
Minor level: 340.63
Major level: 337.50
Minor level: 334.38
Minor level: 328.13
Major level: 325.00
Minor level: 321.88
Minor level: 315.63
Major level: 312.50

Apple closed at 351.57. Support should be at 346.88. And to move higher, Apple will need two closes above 353.13.

Technical support is right at the 346 area.

WATCH LIST:

Bullish Stocks: AMZN, TSLA, ADBE, DPZ, AAPL, ZM, MSFT, W DG, DOCU, EA, BAND, NKLA, CNNE, ZTO

Bearish Stocks: BDX, VRSN, PEP, MDT, GH, EW, ORCL, THS, FLIR, SAGE, XNCR