October 2, 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, I suggested you book the profit on the MSFT debit spread. The gain worked out to 40% for 4 days.

And there are two positions that expire today. Both are short calls. The first is on HOG. And the second is on CLVS.

Hold both positions and if I suggest an adjustment, I will send out a separate email.

The S & P 500 closed out 17.80 points higher yesterday. The S & P closed out yesterday at 3,380.80.

The range for the day was only 35.9 points. This was 61% of the daily average true range.

The average range now reads 58.61 points.

This is now the fourth consecutive range contraction. Which, as you know, does lead to expansions.

And certainly, we should see that today with the market trading about 49 points to the downside pre open.

The market is selling off based on President Trump and the first lady testing positive for Covid-19.

The resistance levels from yesterday's price bar is in the 3,380 area.

Today's projected open would put the S & P about 30 points below yesterday's low of 3,361.39. Watch the 3,376 area on a rally.

I mentioned yesterday to watch the 3,399 area. In fact, I wrote this ... "The midpoint of the monthly price bar is 3,399. Watch this level today if the S & P follows through after the open."

As it turned out, the high yesterday was 3,397.18 or within two points of the daily high. The 3,399 area should still be resistance.

In taking a look at the weekly price bar, the range for the week is only 69.64 points. This is only 52% of the weekly average true range.

And the projected open should be about 4 points above the weekly low of 3,327.54.

On a break below the weekly low, look for support at last week's close of 3,298.46.

The next level of weekly support under this level is around 3,254. If the market did drop that low, the weekly range would be about 10 points higher than the weekly average true range.

So, if the selling pressure does continue after the open, the potential low could be around the 3,254 to 3,264 area.

Be aware of the levels I have mentioned above.

Here are the Key Levels for the Markets:

$VIX:

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
Minor level: 22.66
Major level: 21.88
Minor level: 21.10

The VIX closed at 26.70. For the day, the VIX closed .33 points higher.

This was the second consecutive day where the S & P and the VIX both closed higher. As you know, this is divergence and usually signals that the market will change direction.

The last time we had this divergence was on August 26th & 27th. The market dropped 155 points after the last divergence.

Also, the VIX continues to straddle the midband on the daily chart. The midband is 26.34. And yesterday's low dropped below the midband, but the VIX managed to close above it.

Watch the 27.35 level. Also, watch the 26.31 level today.

S & P 500:

Major level: 3,593.60
Minor level: 3,554.55
Minor level: 3,476.45
Major level: 3,437.40 <
Minor level: 3,398.35
Minor level: 3,320.25 **
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

The S & P closed at 3,380.80. Yesterday's high was about a point below the minor 3,398.35 level.

Watch the 3,320.25 level today. But, at this point, I am biased for a drop to 3,281.20.

The 60 minute chart for the S & P is still bearish and is trading under the midband. That level should be the objective, which is 3,388.

Technical support should be around 3,364.

QQQ:

Minor level: 289.06
Major level: 287.50
Minor level: 285.94
Minor level: 282.81 **
Major level: 281.25
Minor level: 279.69
Minor level: 276.56
Major level: 275.00
Minor level: 273.44
Minor level: 270.31
Major level: 268.75
Minor level: 267.19
Minor level: 264.06
Major level: 262.50
Minor level: 260.94
Minor level: 257.81
Major level: 256.25

The QQQ closed at 282.25. The QQQ closed 4.41 higher.

The QQQ did take out 281.25, which was the objective.

The QQQ did clear the midband on the 60 minute chart. That price level is now 278 and should be support. If the QQQ opens under it, look for it to be resistance.

IWM:

Major level: 162.50
Minor level: 160.94
Minor level: 157.81
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

The IWM closed at 152.18. The IWM closed 2.39 higher on the day.

With the IWM closing above 151.56, if it manages to close above it today, it should test 156. But, with the pre-market sell-off, I would expect it open under it.

The midband is now 146 and should now be support. And support should be at the 148.44 level as well.

And the midband on the 60 minute chart is 153, which should be resistance.

TLT:

Major level: 171.88
Minor level: 171.10
Minor level: 169.53
Major level: 168.75
Minor level: 167.97
Minor level: 166.41
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

The TLT closed at 163.36. It closed .27 higher.

With a close today above 163.28, the TLT should test 165.63.

The 164 area is now technical resistance. This is the key area at the moment. The TLT has crossed into an uptrend, so short term momentum is now bullish.

GLD:

Minor level: 188.28
Major level: 187.50
Minor level: 186.72
Minor level: 185.16
Major level: 184.38
Minor level: 183.60
Minor level: 182.03
Major level: 181.25
Minor level: 180.47
Minor level: 178.91 **
Major level: 175.00 < HIT!
Minor level: 174.25
Minor level: 172.70
Major level: 171.89

The GLD closed at 178.70. The GLD closed 1.58 higher on the day.

Two closes above 178.92 and the GLD should test 181.25.

The GLD is pushing up from the lower band on the 60 minute chart. Look for a move up to the midband, which is 182.

Getting the oversold bounce we expected.

XLE:

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: 34.37
Minor level: 33.59
Minor level: 32.03 **
Major level: 31.25 <
Minor level: 30.47 **
Minor level: 28.90
Major level: 28.12

The XLE closed at 29.03. The XLE closed .92 lower.

Target should be down to the 28.12 level.

Short term charts remain bearish. And the lower band on the 60 minute chart is 27.50.

AAPL:

Minor level: 140.63
Major level: 137.50
Minor level: 134.38
Minor level: 128.13
Major level: 125.00
Minor level: 121.88
Minor level: 115.63 **
Major level: 112.50 <
Minor level: 109.13
Minor level: 103.13
Major level: 100.00

Apple closed at 116.79. Apple managed to close $.98 higher.

Target should be up to 125, but with the pre-market sell-off, look for a drop under the 115.63 level.

Apple broke under the midband on the 60 minute chart. That level is 117 and should be resistance. Apple has crossed into a downtrend on the 60 minute chart. Short term momentum is bearish. Watch the midband.

The lower band is 99 and that should be support now.

WATCH LIST:

Bullish Stocks: ZM, FDX, ROKU, NKE, GH, Z, CNI, DG, AAXN, NTRA, RUN, TWTR, VSLR, TOL,

Bearish Stocks: LMT, BIIB, FLT, CME, CI, BA, IBM, CB, CBRL, ROST, YUM, BAX, EW, HAS, WYNN