September 17, 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 call side of the QRVO straddle. The sale of the call resulted in a 72% return for 6 days. The idea was to close the long side and hold the puts.

The S & P 500 got as high as 3,428.92 yesterday, before selling off into the close.

The market ended closing the day at 3,385.49.

So, after topping out, the market gave back 43.43 points to close at only 2% of the range of the daily bar.

This of course suggests yesterdays low of 3,384.45 should be violated before the high.

And resistance from yesterday's daily price bar is in the 3,398 area. Above this level, there is resistance at 3,406.

The range yesterday was 44.47. This was the third consecutive contraction. The range was 79% of the daily average true range, which is 56.21.

I bring this up because as you know, these contractions will lead to expansions.

And pre open, the S & P is trading about 45 points lower, so we should get an expansion today.

Assuming the market opens 45 points lower, this would project to an open around 3,340.

This would suggest that resistance would also be around 3,362, which is about one half the gap.

If I project the daily average true range to a potential low, it works out to 3,328. This subtracts the daily average true range from yesterday's low. This would be about 12 points lower than the projected open.

Could we have predicted this turn?

If you were on John's webinar yesterday, I mentioned the various scenarios I felt the market could do.

All the scenarios centered around the current objective for the S & P, which is 3,437.40. I mentioned a few scenarios.

Either the market would take out 3,437.40 and head up to the next minor level, which is 3,476.45. At that level, I would expect profit-taking.

The other scenario would be the market hits the 3,437.40 target and profit-taking sets in.

The final scenario was that the market would fall just short of the target and profit-taking would ensue.

As it turns out, it appears the final scenarios is the one coming to fruition.

Yesterday's high was 8.48 points shy of the 3,437.40 target. And as you know, profit-taking set in and will follow through at the open.

Not that all scenarios I outlined suggested that profit-taking would set in.

The question for today will be where will the selling pressure end? Watch the projection levels I 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 26.04. For the day, the VIX closed .45 points higher.

The key again for the VIX is the midband on the daily chart. That level is 25.86 and the VIX managed to close just above it. The daily bar is straddling the midband.

A break under this level and the VIX should head lower.

If the VIX holds at the midband, it should bounce which would suggest the market would reverse lower.

A break under the midband and the market should continue higher.

The other key is the minor 25.78 level. A close today above it and the VIX should head up to 28.13.

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 3,385.49. A close today under 3,398.35 would suggest a drop to the 3,281.20 level.

Watch the minor 3,320.25 level for support.

3,383 is the midband on the 60 minute chart and the S & P should open below it. This level should now become resistance.

Short term trends remain bullish but are close to crossing into a downtrend.

QQQ:

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 **
Minor level: 270.31
Major level: 268.75
Minor level: 267.19

The QQQ closed at 274.61. The QQQ got as high as 280.36 before selling off. Just like the S & P, the QQQ fell just short of its target, which was 281.25.

Watch the 273.44 level. Two closes under this level and the QQQ should test 268.75.

The QQQ broke under the midband on the 60 minute chart. That price level is 277 and should now be resistance.

IWM:

Major level: 162.50
Minor level: 160.94
Minor level: 157.81
Major level: 156.25 < HIT
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 154.82, closing 1.45 higher. The objective for the IWM should be up to 156.25. And yesterday's high was 156.85, so the IWM hit the objective.

The 151 area should provide technical support.

147 is the midband on the daily chart and should be support. And the 152 area should be technical support.

154.70 is the key level on the downside.

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 163.58, closing .49 lower. The 164.85 level is the key short term level.

To move higher, the TLT needs to recoup the 164.85 level. If not, a drop to 162.50 would be expected.

But, if the TLT cannot clear 164.85, the TLT should drop to 162.50.

Technical resistance is still around 166. And also around 165. Watch this area.

Short term charts remain bearish. The TLT should open higher with the market selling off.

GLD:

Major level: 190.63
Minor level: 189.85
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

The GLD closed at 183.97. The GLD closed .52 higher on the day.

Watch the 183.60 level. A close today under 183.60 and the GLD should drop to 181.25. Now, if the GLD can hold the 183.50 level it should head up to 184.

Short term momentum has turned bearish. The technical resistance level is 184. If the GLD can clear 184, it should head higher.

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 < HIT
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 33.94. 32.03 should be support. The XLE hit the 34.27 level, as expected.

Short term the XLE is oversold. It did move above the lower band on the 60 minute chart, which is now 31.90. This should be support on a retest.

Looking for a bounce, which we are getting. Technical support is around 33.

AAPL:

Major level: 150.00
Minor level: 146.88
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

Apple closed at 112.13. Apple closed 3.41 lower. 112.50 should be resistance.

And watch the 109.13 level.

Also, Apple closed under the upper band on the daily chart. That price level is 126 and should now be resistance.

Apple broke under the midband on the 60 minute chart. That level is 115.43 and should be resistance.

WATCH LIST:

Bullish Stocks: RH, ALGN, FDX, MCD, DE, CAT, BYND, NKE, GH, PGR, CSX, IRBT, DKS, RDFN, VSLR, SFIX, UBER, DAR

Bearish Stocks: LMT, BDX, FLT, MLM, BA, AMP, HSY, GD, KEYS, BAX, LDOS, MAN, EFA, LAMR, CRUS BLUE