December 22, 2015 - 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

GOGO? Long at $19.93
Total Premium collected - $1.55
Short December $20 Call - $.30

NCR Long Jan 16 $27 Call
Net Debit - $.80

X Long at $14
Total Premium collected - $.89

ASNA Long at $14.20
Total Premium collected - $.75

ETE Long $14.05
Total Premium collected - $.30
...........................................................................................

Yesterday, the markets bounced up from their oversold condition, with the S & P 500 closing up 15.63 for the day.

How do we know when the market is oversold?

Real simple.

Go to a 60 minute chart for the indexes and if price is at or under the lower extreme bollinger bands, they are oversold.

The extreme bollinger band settings use a 253 period setting, with a 2.576 standard deviation.

The question is this simply a countertrend rally or is this the beginning of another bull leg?

I like to see multiple flush out days when the market is retreating.? At this point, there has only been one. And that was on Friday December 11th.? That day the down to up volume was 12.22.

One anomaly I did not mention from last week was this. Both the S & P 500 and the VIX closed to the downside.

Believe it or not, this is a fairly rare event.? Usually, they will close opposite of each other.

In other words, if the S & P closes up, the VIX will close down.? And vice versa.

The last time they both closed to the downside was on September 18th.

The next week the S & P 500 bottomed at 1,871 and proceeded to run up to a high of 2,116.? A move of 245 points in 6 weeks.

And guess what?

For the week ended October 20th, which happened to be the top, both the S & P 500 and the VIX closed to the upside.

Can a move of that magnitude happen again?

With this volatility, it would not surprise me.

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

The VIX did open under 20.31 yesterday and ran to a high of 20.21 or 10 cents under the 20.31 level, which I mentioned should be resistance.

From there it failed and closed just under the 18.75 level, at 18.70.

At this point, two closes under 17.19 and the VIX should drop to 12.50.

But there is strong support at 14.60 and 15.63.? Look for resistance at the higher levels.

S & P 500 Cash Index:

Major level - 2,093.80
Minor level - 2,085.98
Minor level - 2,070.33
Major level - 2,062.50
Minor level - 2,054.68
Minor level - 2,039.10
Major level - 2,031.30
Minor level - 2,023.48
Minor level - 2,007.82
Major level - 2,000.00
Minor level - 1,992.18

The S & P is only 10 points from the next major level, which is 2,031.30.

A close today above 2,007.82 would confirm that objective.

If the S & P takes out 2,031 today, I would expect some minor resistance at 2,039.

Nasd 100 (QQQ):

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
Minor level - 108.60
Minor level - 107.03
Major level - 106.25

Yesterday's low was 45 cents above the previously identified support level of 109.38.

A close today above 110.16 and the objective should be back up to 112.50.

TLT:

Major level - 125
Minor level - 124.22
Minor level - 122.66
Major level - 121.88
Minor level - 121.09
Minor level - 119.53 *
Major level - 118.75
Minor level - 117.97
Minor level - 116.40
Major level - 115.62

The objective should be back up to 125. Minor resistance at 124.22.

Lower levels should act as support.

GLD:

Major level - 106.25
Minor level - 105.46
Minor level - 103.91
Major level - 103.13
Minor level - 102.34 *
Minor level - 100.78
Major level - 100.00
Major level - 96.88

I mentioned yesterday that if the GLD could close above 103.13 for two days, a bottom maybe forming.

And yesterday, the GLD closed at 103.15.? If it can close above 103.13 today, the GLD may get a decent bounce.

The last two times the GLD closed above 103.13, it promptly failed and closed under that level the next day.

XLE:

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

Two closes under 58.60 and the XLE should move to 56.25.

56.25 should be a difficult to break under on the first attempt.

For the XLE to move up, it will need two closes above 60.16.

Apple:

Major levels for Apple are 125, 118.75, 112.50, 106.25, 100, and 93.75. 106 should be a major support level for Apple.

Two closes above 107.81.? Support should be at 106.25.

Watch list:
Bullish Stocks: NTES, CI, ULTA, DPS, ADBE, KMB, FSLR, QIHU, ELS, NTES, TRIP, K, EXR, LLY

Bearish Stocks: CMG, COO, HAR, UNP, TIF, CMI, WDC, CXO, DKS, CMI, BLUE, KEX, BURL, OUTR, CF, CLH, WES

Be sure to check earnings release dates.