July 8, 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 market pulled back yesterday. The day closed out 34.40 points lower for the day.

The S & P 500 closed at 3,145.32.

A couple of comments from yesterday. The S & P failed to close above the minor 3,164 level. A close above this level would have suggested the market would head higher.

So, this becomes a key level again today. Why?

Well, if the S & P can reclaim this level, I would expect the market to continue the bull leg.

A close under this level would suggest that the S & P would continue with profit-taking.

The second comment is about the VIX. I have been writing about the fact that the VIX had traded above the upper band on the daily chart back when the S & P bottomed out in March.

After moving back inside the upper band, the VIX continued lower to where?

If you guessed the midband, you would be correct.

But, you know this is the typical pattern. So, knowing this can be quite helpful.

And the VIX dropped to just above the midband for the first time on June 5th. That day the low was 23.54. If rallied from 23.54 to a high of 44.44 in seven days.

The result for the S & P was that it dropped from a high of 3,233.13 to a low of 2,965.66. That was a drop of 276 points.

After the VIX peaked out at 44.44 it once again dropped back to the midband. In fact, the low two days ago was 24.92. And the midband was 23.70.

Now, the questions are two-fold.

First, is how high can the VIX go? And the second is what should happen if it takes out the midband?

As to the first question, there are a few points of resistance. From a technical standpoint, there is resistance at around 30.50, which is the midband on the 60 minute chart.

I bring this up because if the VIX can take out the midband, then the logic suggests it should test the upper band, which is 39.60.

There is also a technical resistance level right around 32. So, there are some key resistance levels close to the market where the VIX could find some resistance.

There is also the major 31.25 resistance level right in between the two technical levels I mentioned.

Watch the VIX levels I discuss. This should help to determine what the market should do.

Just a few other comments.

Earnings season will pick up next week.

Most of the major banks report next week. The following week we will start to hear from the tech giants.

You may have noticed that the corporate buybacks have not been posted in the members' area. This, of course, is a function of the fact that the buybacks have almost totally dried up with the emersion of the Covid-19 virus.

In fact, in the last two months, there have only been four announcements. I have updated the companies making announcements on webinars.

For June the only buyback announcements are CBOE with a $250 Million program and SNPS with a $500 Million announcement.

Pre open, the S & P 500 is relatively flat.

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 29.43. It closed 1.49 higher on the day. This was the first close above the minor 28.91 level.

This now suggests that if the VIX closes above the minor 28.91 level, it should test 31.25.

I would expect resistance at 31.25. But, watch the minor 28.91 level today. A break under this level and the VIX should head lower.

And technical resistance is at 30. The 60 minute chart is still bullish, but is close to crossing into a downtrend. If the 60 minute does cross into a downtrend, it would suggest the market will continue higher.

S & P 500:

Major level: 3,281.20
Minor level: 3,242.15
Minor level: 3,164.00 **
Major level: 3,125.00 < Hit
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 3,145.32. The S & P did close at 6% of the range of the daily bar, which does suggest that that low should be violated.

The resistance level from yesterday should be in the 3,164 area, which is right around the minor level. If the market can reclaim this level, I would expect the bull move to continue.

The major 3,125 level should be support.

Technical support is around 3,140.

QQQ:

Major level: 262.50
Minor level: 260.93
Minor level: 257.80 **
Major level: 256.25 <
Minor level: 254.69
Minor level: 251.56
Major level: 250.00
Minor level: 248.54
Minor level: 245.31
Major level: 243.75
Minor level: 242.15
Minor level: 239.00
Major level: 237.50

The QQQ closed at 256.61. The QQQ closed 1.78 points lower.

It closed under the minor 257.80 level, but managed to hold the major 256.25 level. This should still be support. If this does not hold, I would expect 254.69 to hold.

The QQQ will need to reclaim the 257.80 level to head higher.

Technical support is around 254. The QQQ did clear the upper band on the daily chart. The upper band is 256.80 and the QQQ is trading right at that level. Watch how the QQQ reacts at the upper band.

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 < Hit
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 140.89. At this point, we know there is resistance at the midband, which id 146.34.

And the minor 142.19 level should also be resistance.

Technical support is around 140. Watch to see if the IWM holds this level. If it can't, it should drop.

TLT:

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
Minor level: 155.47

The TLT closed at 165.21. The TLT is just under the 165.63 objective.

The next minor level is 166.41. The TLT will need to clear this level to head higher.

Watch the minor 164.85 level on the downside. A break under this level and it should head lower.

Support is still around 162, which is the midband on the 60 minute chart.

GLD:

Major level: 171.89
Minor level: 171.11
Minor level: 169.54 **
Major level: 168.75 < HIT
Minor level: 167.98
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

The GLD closed at 169.04. The GLD took out the 168.75 objective.

The minor 167.98 level should be support.

Technical support should be at 168.

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 36.26 The XLE needs to clear the minor 36.72 level to head higher. A close today under 36.72 and the XLE should drop to 34.

To move higher, the XLE will need two closes above 38.28.

The midband on the 60 minute chart is now 39 and the XLE is below it. This should now be resistance. This level is 39 and the XLE will need to clear it to head higher.

The 36 area should be technical support.

AAPL:

Major level: 387.50
Minor level: 384.38
Minor level: 378.13
Major level: 375.00 < Hit
Minor level: 371.88
Minor level: 365.63
Major level: 362.50
Minor level: 359.38
Minor level: 353.13
Major level: 350.00
Minor level: 346.88
Minor level: 340.63
Major level: 337.50

Apple closed at 372.69. Apple closed 1.16 lower for the day.

The 371.88 level should still be support, and yesterday it held. And watch to see if Apple can clear 375.

Technical support is around 369.

WATCH LIST:

Bullish Stocks: AMZN, TSLA, SHOP, REGN, NFLX, ADBE, NOW, NVDA, ASML, ILMN, AAPL, LRCX, AMGN, WIX, VEEV, WST

Bearish Stocks: BYND, PNC, MMS, COF, CLUE, RAMP, AMBA, XOM, ADS, FTDR, FANG, DIN, AJRD, FUN, HFC