October 30, 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.

The S & P 500 bounced back after the bearish long range day on Wednesday. Yesterday closed 39.08 points higher for the day.

The S & P 500 closed the day out at 3,310.11.

The daily price bar closed at 62% of the range of the daily bar. This does suggest that yesterday's high of 3,341.05 should be violated before the low of 3,259.82.

The support area from yesterday's daily bar should be in the 3,300 area. The next support level under this area is around 3,293.

The range yesterday was 81.23 points. This did actually exceed the daily average true range, which is 58.76. So, the range was 138% of the average.

The question now is simple.

Is this the end of the pullback?

Possibly. But I do expect another downswing. I say this because the VIX is above the upper band on the 60 minute chart. This tells us that the VIX is overbought. But, it also tells us to expect a rally to the upper band once it does come back inside the bands.

A rally in the VIX suggests that the market should drop.

But, yesterday's bounce was strong. I say this because it did manage to close above the midpoint of the bearish long-range candle from Wednesday. The midpoint of Wednesday's price bar was 3,305.69 and yesterday's close of 3,310.11 managed to close 4.43 points above the midpoint.

A close under the midpoint would have been bearish.

Pre open, the S & P is trading about 25 points lower.

This projects to an open around 3,285. Watch the major 3,281 level on the downside.

If the major level cannot hold, a test of yesterday's low would be possible.

In looking at the weekly price bar and how it is forming, it already has a range of 182 points. This exceeds the weekly average true range by 138%. So, it is possible the weekly range is already in.

And the weekly midpoint is 3,350. A close under this level would be bearish.

The other price bar to consider is the October monthly price bar because today close out the month.

Even with this sell-off, the monthly price bar is forming an inside bar.

And the range so far is 290 points, which does exceed the monthly average true range, which is 267 points.

Last month's low is 3,209.45, so the S & P would have to drop just over 100 points today to take out last month's low.

The other key metric from the monthly chart is that the upper band is 3,315.

And yesterday's close was just under it. A close under it would be bearish. And if the monthly price bar does end up forming an inside bar, it would tell us to expect a range expansion to follow.

FB is down about $5 after reporting. GOOGL is trading about $105 higher after reporting. AMZN is trading $60 lower and ZEN is trading almost $12 higher after reporting.

Here are the Key Levels for the Markets:

$VIX:

Minor level: 41.40
Major level: 40.62
Minor level: 39.84
Minor level: 38.28 **
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

The VIX closed at 37.59. The VIX closed 2.69 points higher.

The VIX got as high as 41.16 before closing just above 37.50.

The next minor level is 38.28. The VIX needs to close above this level to continue higher.

Short term the VIX is overbought. Is it trading about 20% above the upper band on the 60 minute chart. That level is now 35.85.

This also tells us to expect another run to test the upper band once it does close back inside it.

The VIX is also just under the upper band on the weekly chart. That level is 39.30.

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 3,310.11. The S & P closed 39.08 points higher.

Watch the major 3,281.20 level for support. If the S & P breaks under this level a drop to 3,242.15 would be possible.

Also, monitor the major support levels I mentioned above.

Technical support is around 3,239. The market should open about 45 points above this level.

QQQ:

Major level: 300.00
Minor level: 298.44
Minor level: 295.31
Major level: 293.75
Minor level: 292.19
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 **

The QQQ closed at 276.39. The QQQ closed 4.75 higher.

Watch for support at the 275 level. If the QQQ does take out 275, expect it to head lower.

279 is the midband on the 60 minute chart and should be resistance.

Technical support is at 267.

IWM:

Major level: 168.75
Minor level: 167.19
Minor level: 164.06
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

The IWM closed at 155.14. The IWM closed 1.83 higher on the day.

The IWM will still need two closes under 154.70 and the IWM should drop to 150.00.

The midband on the 60 minute chart which is 155. Watch this level. The IWM is trading right at this level.

151 should be support.

TLT:

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 <
Minor level: 158.60
Minor level: 157.03
Major level: 156.25

The TLT closed at 159.14. It closed 1.56 lower. The TLT closed below the major 159.38 level.

Watch the minor 160.16 level on the upside. On the downside, watch the 158.60 level.

160 should be technical resistance.

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 <
Minor level: 174.25
Minor level: 172.70
Major level: 171.89

The GLD closed at 175.40. The GLD closed .73 lower on the day.

The GLD did hit the 175 level as expected. The next level on the downside is 174.25.

177 should be technical resistance.

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: 28.13 <

The XLE closed at 28.56. The XLE closed .85 higher.

The XLE took out the objective of 28.13. And bounced as expected.

This countermove should go to around the 30 area. Watch the minor 28.90 level. Two closes above this level and the XLE should test 31.25.

The 28.00 area should be technical support.

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 115.32. Apple closed $4.12 higher.

Apple needs two closes above 115.63 to move up to 125.

Apple is right at the midband on the 60 minute chart. That level is 115. Watch how Apple reacts at this level.

WATCH LIST:

Bullish Stocks: GOOGL, ALGN, HUM, PAYC, SPY, UNH, BABA, CMI, ROKU, SPLK, TEAM, LH, ITW, FDN, RMD, PYPL, QRVO, QRVO, DGX, MCHP,

Bearish Stocks: LMT, NOC, LHX, CME, IBM, LDOS, CBOE, STWD, SBRA