June 12, 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 close the MKC debit spread. With short term options, it was best to take a small loss and move on.

And there is one call position that expires today and that is the short $7.50 call on CLVS. It should expire worthless today. But, if I do suggest an adjustment to this position, you will receive a separate email.

The S & P 500 had a major sell-off yesterday. The sell-off quite frankly was not that unexpected. The extent of the sell-off was.

The S & P dropped 188.04 points. This was a drop of 5.89%.

The DOW dropped even more, closing 6.9% lower. The NASD Composite faired the best, closing only 5.27% lower.

The market has been overbought as I have been writing about. We know this because the bullish percent index has been at extreme overbought levels. It peaked on Wednesday at 92.8%, which is the highest reading all year.

This reading was even higher than at the top in February. By the way, the index dropped 15.8%. On a percentage basis, it was a drop of 17.03%.

It shows you how quickly investors can change their minds.

I suspect this tends to happen when there is a spike in COVID-19 cases nationwide.

The long-range bearish bar from yesterday should provide resistance. The daily bar closed at only 2% of the range of the bar.

This puts resistance around 3,062.

The range for the day was 124.04 points. This was almost two times the daily average true range, which is 65.70. There were actually 10 consecutive days that were less than the daily average true range.

The last time the S & P had a range that equaled the daily average was on May 27th. I'm bringing this up because we know that expansions follow contractions. And typically, contractions will follow expansions, so today may contract.

The key as well is that the S & P tested the midband. Yesterday's low was 2,999.49 and the midband is 2,998.39.

The question is whether it will hold. If it can't, the market should head lower.

I suspect the midband will hold as support. I say this because yesterday had the largest selling climax I have ever seen.

The down to up volume read a massive 63.13 yesterday. This was a major flush out day.

Pre open, the S & P is trading about 58 points higher. This projects to an open at 3,060, which is just under the 3,062 resistance level.

Watch to see if the market can clear this level. If it can't, it should head lower.

ADBE reported last night and it's trading $19 higher. LULU reported and is trading $9 lower.

Here are the Key Levels for the Markets:

$VIX:

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 **
Minor level: 22.66
Major level: 21.88

The VIX closed at 40.79. It popped 47.95% on the day. I think this was the largest one-day pop I have ever seen.

But, the VIX is now overbought. Yesterday's high of 42.58 was just under the upper band on the 60 minute chart.

This level is 43.26 and should be resistance. On the downside, watch the 37 level.

40.62 is the closest major resistance level. Watch to see if this holds as resistance.

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 3,002.10. The projected open should be around 3,060 or just under the resistance level from yesterday's daily bar. Watch the 3,060 area.

Support on the downside should be at 3,046.90. Also, the 3,007.85 level should be key. If the S & P can close above this minor level for two days, it should run up to 3,125.

Of course, watch the midband, which is 2,998.

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 234.02. The QQQ closed 12.20 points lower.

Technical resistance is around 240. And the 238 area is resistance from yesterday's daily price bar.

Watch to see if the QQQ can clear the minor 235.91 level. It should be support if it can.

IWM:

Major level: 156.25
Minor level: 154.70
Minor level: 151.56 **
Major level: 150.00 Hit
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
Minor level: 142.19
Minor level: 139.06
Major level: 137.50

The IWM closed at 135.03. The IWM dropped 11.15, which was a drop of 7.63%.

The IWM dropped under the midband, which is 147.

The IWM is right at the midband on the 60 minute chart, which is 133.70. This should be a support level.

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 163.88. The TLT took out the 162.50 target. And with a close today above 163.28, the TLT should head up to 165.63.

At this point, support should be at the minor 158.60. And at the 159.38 level.

The TLT is in a downtrend on the 60 minute chart. And the TLT is sitting right at the midband is 164.05. Watch how the TLT opens today in relation to the midband.

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 162.39. The GLD closed just under the major 162.50 level. Watch this level today.

160.16 should now be support.

Technical support should be at 160.

XLE:

Minor level: 47.65
Major level: 46.88 HIT
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 38.84. The XLE broke under the 40.63 level.

A close today under the minor 39.83 level and the XLE should drop to 37.50.

The midband on the 60 minute chart is 38. Watch to see if the XLE can hold this.

AAPL:

Major level: 350.00
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
Minor level: 309.38
Minor level: 303.13
Major level: 300.00

Apple closed at 335.90. After hitting the $350 objective, Apple dropped 16.94.

Watch the major 337.50 level. A break under this level and Apple should continue to drop.

And technical support is right at the 336 area.

WATCH LIST:

Bullish Stocks: GOOGL, TSLA, CMG, NTES, ASML, NVDA, AAPL, PAYC, LULU, LRCX, FB, ADSK, BABA, KLAC, ZM, SPOT, SWKS

Bearish Stocks: BDX, VRSN, SAFM, ROKU, AEM, THS, PFE, FGEN