August 22, 2018 - 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.

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The S & P 500 once again inched higher, closing 5.91 points higher on the day. It closed at 2,862.96.

With a close above 2,854.00 it does further confirm a move up to the 2,890.60 level.

But, it does not mean we could see a pullback before it does move higher.

This could happen for a few reasons.

The first is that yesterday was the second consecutive range contraction. Yesterday's range was only 11.91 points, as compared with the daily average true range of 20.99.

This follows the contraction on Monday, which was also less than one half the average true range.

And second, the close percentage yesterday was only 14% of the daily price bar. This puts the odds of the low being violated before the high at around 85%.

With the S & P 500 trading before the open down about 3.50 points, the low should be violated at the open.

Assuming the pre open activity continues to the open, you would want to watch yesterday's close of 2,862.96 as potential resistance on a rally.

The third bearish factor at the moment is that both the VIX and the S & P 500 closed to the upside. This as you recognize is a divergence and usually indicates that a change in direction could be coming.

The other factor with the VIX is that it closed back above 12.50. I would still expect resistance at higher levels. But once again, with the VIX down to long term support, a bounce here would not be a surprise.

The support area from yesterday's daily bar is in the 2,862 to 2,867 area.

The support area from last week's weekly price bar is in the 2,829 to 2,842 area. With the S & P 500 closing out well above this area, a pullback could be deep without affecting the bull move.

Continue to monitor the longer term levels for the market.

Here are the Key Levels for the Markets:

$VIX:

Major level: 25.00
Minor level: 23.44
Minor level: 20.31
Major level: 18.75 <
Minor level: 17.19
Minor level: 14.06 **
Major level: 12.50 <
Minor level: 10.94
Minor level: 7.81
Major level: 6.25

The VIX closed at 12.86. This puts the VIX to 36 cents above the major 12.50 support level.

At this point, I would expect resistance at 14.06. If the VIX takes out 14.06, then it could move higher.

On the downside, the key level is 11.72. A break under this level and the VIX should continue lower.

SPX:

Major level: 2,890.60 <
Minor level: 2,878.40
Minor level: 2,854.00 **
Major level: 2,841.80 <
Minor level: 2,829.60 **
Minor level: 2,805.20
Major level: 2,793.00
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10

Target is still up to 2,890.60. With a close above the minor 2,849.10 level, I would expect that 2,836.90 would offer support on a pullback.

Short term intra day 30 and 60 minute charts are still bullish. Technical support is at 2,837, which is a minor support level. So, this level should offer strong support on profit taking.

QQQ:

Major level: 187.50
Minor level: 185.94
Minor level: 182.81 **
Major level: 181.25 <
Minor level: 179.69
Minor level: 176.56
Major level: 175.00
Minor level: 173.44
Minor level: 170.31
Major level: 168.75

The QQQ closed at 180.36. Target of 181.25 was hit yesterday, with a high of 181.44.

181.25 is a major level for the QQQ. If it can close above the 181.25 level for two days, a move up to 200 is possible.

But, with the VIX so low, a possible pullback could happen first.

Minor support is at 179.69.

IWM:

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

The IWM closed at 170.76. This now implies that if the IWM closes above 169.53, the IWM should move up to 171.88.

At this point, I would expect support at the minor 169.53 level. 173.44 could offer resistance on the upside.

TLT:

Major level: 123.44 <
Minor level: 121.49
Minor level: 120.70 **
Major level: 120.31
Minor level: 119.92
Minor level: 119.14
Major level: 118.75
Minor level: 118.36
Minor level: 117.58
Major level: 117.19

The TLT closed at 121.38. The TLT should test 123.44.

Watch to see if the TLT can hold the minor 121.09 level. If it can, it should head back up. A break under it and a drop to 120.70 is the next move.

GLD:

Major level: 117.19
Minor level: 116.80
Minor level: 116.02
Major level: 115.63
Minor level: 114.85
Minor level: 113.28 **
Major level: 112.50 <
Minor level: 111.72
Minor level: 110.16
Major level: 109.38

It closed at 113.02. To move higher, the GLD will need two closes above 113.28. However, I would expect resistance at that level.

113.67 is strong resistance.

XLE:

Major level: 78.13
Minor level: 77.35
Minor level: 75.78
Major level: 75.00
Minor level: 74.22
Minor level: 72.66 **
Major level: 71.88 <<
Minor level: 71.10
Minor level: 69.53
Major level: 68.75

The XLE closed at 73.47. The objective for the XLE should be to the major 75 level.

71.88 should offer support. And 73.44 should also offer support.

FXY:

Major level: 86.72 <
Minor level: 86.53
Minor level: 86.14 **
Major level: 85.94
Minor level: 85.75
Minor level: 85.36
Major level: 85.16
Minor level: 84.97

The FXY closed at 86.66. The FXY should test 86.72 and if it clears this level, it should head higher.

86.52 should offer support.

AAPL:

Major level: 225.00
Minor level: 221.88
Minor level: 215.63
Major level: 212.50 <
Minor level: 209.38
Minor level: 203.13
Major level: 200.00

Apple closed at 215.04. Apple will still need two closes above 215.63 to move up to 225.

214.84 is minor support. Watch to see if Apple holds this level. If it can't a test of 212.50 is possible.

WATCH LIST:

Bullish Stocks: CMG, GWW, HUM, SPY, UNH, BDX, FDX, AAPL, CTAS, AMGN, CME, AAP, RH, WDAY, V, DXCM, SODA, UHS, VRSK, LLY, AXP

Bearish Stocks: AVGO, NTES, STZ, BABA, ALXN, ALNY, FMC, XEC, DY, SINA, CTRP, WGO, OSTK, TUP

Be sure to check earnings release dates.