December 21, 2018 - MDT Pro Tips A.M.

CURRENT POSITIONS:

GOGO Long at $19.93
Total Premium Collected $1.95
 
ASNA Long at $14.20
Total Premium Collected $0.75

DUST Long $4.50
Total Premium Collected $0.70

SNAP Long at $14.54
Total Premium Collected - $1.65

OI Long Feb $19 call @ $1.70

MDR Long @ $9.31

PHM Long Dec $25.50 put @ $0.80
PHM Short Dec $24.00 put @ ($0.35)

ZEN Long Jan $55 call @ $2.30
ZEN Long Jan $50 put @ $1.60

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We do have one position that expires today and that is the long debit spread on PHM.  PHM seems to be the only stock not going lower in this meltdown.

And it is the one stock you would expect to drop considering the slowdown in real estate activity and the raising of interest rates.

The long $25.50 put is only 30 cents out of the money.  So, expect an alert today if it does move in the money.

And you should have added an uneven strangle on ZEN yesterday. This trade is structured with a bias to the downside, with a hedge on the upside in the event the stock does bounce.

Yesterday continued the sell off for this market.  For the day, the S & P 500 closed 39.54 points lower.

And the range was 68.45. Compared with the daily average true range which now reads 55.90 points, yesterday was once again a strongly bearish day.

By definition, the market is oversold.  We know that simply because it is trading under the lower band on the daily chart.

But, it does not mean the market will turn on a dime.

In fact, if anything, this recent sell off demonstrates how irrational markets can get.

The trading under the lower band puts us on alert that the S & P 500 is oversold.

Patience, at this point, is the best virtue.  I would not consider dabbling long until the S & P 500 can close above the lower band.

And if a trade under the lower band is considered, I would want to see the market firm up or consolidate for a few days in order to initiate a trade under the lower band.

Remember, this sell off will create opportunity.  The question is when will it turn?

We have our price projections based on our resistance levels and more importantly, we have price levels that help to confirm if certain levels should get hit.

But, based on yesterday's daily bar, resistance should be in the 2,475 to 2,482 area.

At this point, the weekly price bar has a range of 160 points.  And the weekly average true range is 96.26 points.  So, we have exceeded the average by 167%.

This suggests that the range for the week could already be in.

But, with the daily close percentage at 38%, it does suggest that the odds of violating yesterday's low before the high is around 60%.

And with a bearish weekly price bar, I would expect the market to close today at the lower end of the bar.

Watch yesterday's low of 2,441.18.  A retest would certainly be likely. 

After yesterday's close, there are now 426 stocks trading under their lower band on the daily chart.

I really do not recall ever seeing that many stocks with this formation.  And I will continue to track this oversold condition.
 
Continue to monitor the levels as I mentioned above.

Here are the Key Levels for the Markets:

$VIX: 
 
Major level: 31.25
Minor level: 29.69
Minor level: 26.56
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 

The VIX finally moved up yesterday.  It closed at 28.58, up 3 on the day.

This now suggests that if the VIX closes above 26.56 today, it could test 31.25.

Having said that, it is trading at the upper band on the daily chart.  That price level is 28.24.

If this level does turn the VIX back, we may see the bounce we have been looking for.

26.56 should be minor support.

SPX: 

Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00 HIT!
Minor level: 2,484.38 **
Minor level: 2,453.13
Major level: 2,437.50 << 

After hitting and taking out the 2,500 level, the S & P 500 had its first close under 2,484.38.

For the market to bounce, it will need to reclaim 2,484.38 today.  If it closes under it, then the downside objective becomes 2,437.50.

2,500 should now be resistance.

QQQ:  

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: 154.69 **
Minor level: 151.56
Major level: 150.00 <
Minor level: 148.44
Minor level: 145.31
Major level: 143.75

The QQQ closed at 152.29.  The low for the day came in at 39 cents above the 150 level.  So, effectively the downside target was hit.

At this point, I don't see any rally going above the 162.50 level.  It if can, it would tell us that something is changing.

156.25 should be resistance as well.

IWM:
 
Minor level: 145.31
Major level: 143.75 
Minor level: 142.19 
Minor level: 139.06
Major level: 137.50 <
Minor level: 135.94 **
Minor level: 132.81
Major level: 131.25
Minor level: 129.69
Minor level: 126.56
Major level: 125.00

The IWM closed at 131.79.  It closed down 2.21 on the day.  

Resistance is at 134.38 and 137.50.

Yesterday's low took out the 131.25 level.  And I do believe the IWM drops to 125.

TLT:  

Major level: 123.44
Minor level: 123.05
Minor level: 122.27
Major level: 121.88 <
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

The TLT hit the 121.88 and sold off.  It closed at 120.74.  This now suggests that if the TLT closes under 121.49 today, it should drop to 120.

120.31 should offer support.  So, a violation would indicate a further drop.

The daily chart is close to crossing into an uptrend.

GLD:  

Major level: 121.88
Minor level: 121.10
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 
Major level: 112.50 

The GLD closed at 119.24.  The next minor level is 119.53.

The GLD is inching closer to the midband on the daily chart which is 120.22.  This level should be resistance.

XLE: 

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 **
Minor level: 60.16
Major level: 59.38
Minor level: 58.60
Minor level: 57.03
Major level: 56.25

The XLE closed at 57.19.  It was the third day trading under the lower band.

This tells us to expect a retest of the lower band once the XLE does bounce.

The XLE has now had two closes under 59.38.  This suggests it could drop to 50.

The XLE is oversold, so it may bounce before heading lower.

FXY:

Major level: 85.94
Minor level: 85.75
Minor level: 85.36 **
Major level: 85.16 
Minor level: 84.97 
Minor level: 84.58 
Major level: 84.38 
Minor level: 84.18 
Minor level: 83.79  
Major level: 83.59 

The FXY jumped 1.04, to close at 85.87.  Watch to see if the FXY can clear 85.94.  If it can, it could move up to 86.72 or 87.50.

I do think the 86.72 level could offer strong resistance.

AAPL:

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 
Minor level: 167.19
Minor level: 164.06
Major level: 162.50 <

Apple closed at 156.83 yesterday.   With a break under 162.60, I am now looking for a downside objective of 150.

162.50 should be resistance.

WATCH LIST:

Bullish Stocks: TSLA, PANW, CRM, CASY, DATA, KMB, CTXS, HSY, YUM, AZPN, GDOT, D, GRMN, LNG, CIEN

Bearish Stocks: CHTR, SPY, DIA, FDX, FLT, STZ, GS, WEX, LH, HON, UTX, CXO, RACE, JPM, FANG, DGX, ALL, ABC

Be sure to check earnings release dates.