July 13, 2017 - MDT Pro Tips A.M.

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to 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.

CURRENT POSITIONS:

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APA Long Oct $47.50 Call at $3.45
APA Short Oct $52.50 Call at $1.10

SBH Long at $19.20
SBH Short July $20 Call at $0.30

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Yesterday again demonstrates how difficult it can be to trade intra day. I'll explain what I mean in a moment.

The S & P 500 gapped up yesterday and closed at 2,443.25. For the day, the market was up 17.72 points or .73%. However, the range for the day was only 10.01 points.

And this is where it makes it difficult to eke out a living day trading.

The S & P 500 opened at 2,435.75. If you look at the first ten minute price bar, you will see that it closed at 2,440.92. From the close of that bar, to the close for the day, the move was only 2.33 points.

Of course, if you bought right at the open, you could have garnered a larger part of the 10 point intra day range, if you held the majority of the day.

But, the large move for the day consisted of holding a position overnight. The bullish gap was about just over 10 points or about the size of the range for the whole day.

And this is not typically what day traders do.

But, it certainly seems that this is the nature of this market. Small narrow range days and pullbacks and then bam ... the market takes off again leaving those behind who were not positioned on the right side.

Perhaps these gaps are created by the shorts who are now forced to cover their losing position are disadvantaged prices.

For us, we know that shorting this market is not the wise thing to do. I haven't harped on this in a while, but you will know that is my mantra and will be the mantra until the market changes course.

The other thing we knew was that there was a high probability of the S & P 500 testing the lower band on the 30 minute chart.

The bands create price probabilities that you cannot see without using them.

For example, the S & P 500 broke UNDER the lower band on the 29th. this tells that that there is a very high probability that the lower band will be tested again.

And on the 6th of July, the bands were tested ... and price broke under the lower band once again.

The first point is that when price takes out the lower band you expect a retest of the lower band again. And if it takes it out again, expect another retest. The second point is that on a retest, if price holds above the lower band, that usually signals that the downmove is over.

And that is what happened on Tuesday. In fact, I wrote about it in that daily update.

We were also biased to the upside because the VIX had confirmed a move to the 9.38 level. Even though the S & P 500 is not giving us any clues based on the next confirming levels, we can still use the VIX to help determine a direction.

The final comment I will leave you with regarding the bands on the 30 minute chart is this. At yesterday's gap open, it gapped above the mid band on the 30 minute.

This is usually a bullish sign, because you expect resistance at that level when that timeframe is in a downtrend, which the 30 minute chart is.

So, at this point, I would expect the midband to offer support. That level is 2,433.

Pre market, the markets are biased to a bullish open.

Continue to follow the resistance levels.

Here are the Key Levels for the Markets:

$VIX:

Major level: 18.75
Minor level: 17.97
Minor level: 16.41
Major level: 15.63
Minor level: 14.84
Minor level: 13.28
Major level: 12.50
Minor level: 11.72 <
Minor level: 10.15
Major level: 9.38

The VIX closed at 10.30. At this point, the 9.38 level should still be the objective. However, it will need to drop under 10.16. This should help to confirm the move down.

10.55 should be minor resistance. And 10.94 should also be resistance.

$SPX:

Major level: 2,500.00
Minor level: 2,484.38
Minor level: 2,453.12
Major level: 2,437.50 **
Minor level: 2,421.88 <
Minor level: 2,390.62
Major level: 2,375.00
Minor level: 2,359.38
Minor level: 2,328.12
Major level: 2,312.50

The 2,437.50 level should offer support today. If the S & P 500 breaks under that level, I would expect 2,429.70 should offer strong support.

2.445.30 is a minor resistance level, which needs to be cleared for the move up to the next confirming line, which is 2,453.12.

QQQ:

Major level: 143.75
Minor level: 142.18
Minor level: 139.06 ***
Major level: 137.50 <
Minor level: 135.94 ***
Minor level: 132.81
Major level: 131.25

The QQQ closed at 140.70, above the upside level of 139.06. At this point, the objective should now be 143.75.

Minor resistance is at 141.41. This level needs to be cleared for the QQQ to hit the objective.

139.84 should now offer support.

IWM:

Major level: 143.75
Minor level: 142.97
Minor level: 141.41 ***
Major level: 140.63 <
Minor level: 139.85
Minor level: 138.28
Major level: 137.50
Minor level: 136.72
Minor level: 135.16

The IWM took out the 140.63 objective, but closed just under the 141.41 next minor level. Bias remains bullish, but resistance is at 141.41. The IWM needs to clear this level to head higher.

141.02 should now be minor support.

TLT:

Major level: 131.25
Minor level: 130.47
Minor level: 128.91
Major level: 128.13
Minor level: 127.35
Minor level: 125.78
Major level: 125.00
Minor level: 124.22
Minor level: 122.66 <
Major level: 121.88

The TLT closed at 123.96. 125 should still be the objective. Minor resistance is at 124.61.

123.63 should now be minor support.

GLD:

Minor level: 122.66
Major level: 121.88
Minor level: 120.32
Minor level: 119.53
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63 <<
Minor level: 114.85
Minor level: 113.28

The GLD continues to trade between the major 115.63 level and the minor 116.41 level.

116.02 is a minor level and if the GLD closes above it today, expect a move up to 117.20.

118.75 should be major resistance.

XLE:

Minor level: 69.53
Major level: 68.75
Minor level: 67.97
Minor level: 66.41
Major level: 65.63 <<
Minor level: 64.85
Minor level: 63.28 **
Major level: 62.50
Minor level: 61.72

The XLE could not clear 64.85 yesterday. It actually did, but not close above it. 65.63 should still be the objective.

Minor support is at 64.84 and 65.65. Minor resistance is at 65.43.

FXY:

Minor level: 87.89
Major level: 87.50
Minor level: 87.11
Minor level: 86.33
Major level: 85.94
Minor level: 85.55
Minor level: 84.77 **
Major level: 84.38 <
Minor level: 83.60
Minor level: 83.20
Major level: 82.81

The question now is how high should this bounce go? First off, the FXY did close above 84.77, so a close above that level today and the FXY should test 85.94.

I would expect resistance at that level. If it does not hold, I would expect 87.50 to.

Email me an let me know if you took the suggested short and have now been stopped out.

AAPL:

Major levels for Apple are 153.13, 150, 146.88 143.75, and 140.63.

143.75 should now offer support. 146.88 should be the objective.

Short term momentum is shifting to the upside.

WATCH LIST:

Bullish Stocks: PCLN, GS, FDX, BA, STZ, LLL, CMI, CP, MCD, AET, VRTX, MCO, KSU, TSO, VRSN, MTOR

Bearish Stocks: AZO, ORLY, SJM, CASY, CVX, AAP, JACK, DG, SLB, QCOM, TSCO

Be sure to check earnings release dates.