February 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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I had written about how the midband on the 60 minute chart for the S & P 500 should offer resistance. And that the trigger to go short would be the VIX heading higher.

And yesterday, both situations surfaced. The S & P 500 spend another day stopping just under the midband on the 60 minute chart. The midband is now 2,751.

And the higher for the day was 2,747.75, just a few points under the midband.

As for the VIX, it headed down all day, until 2:00 EST when it stopped at 16.97 and proceeded to head straight up.

From that point, the VIX rallied to close at 20.18.

The move up in the VIX certainly was the trigger to get short the market, but I have to admit, this is truly a day trade. You would have to be watching for the spike in the VIX to take advantage of it. And I know of people cannot do that.

But, it pays to know what to look if you do have the opportunity to trade short term.

For example, the $275 put on the SPY yesterday had a low of $1.29 and a high of $4.45. If you caught the extremes, you would have a gain of about 245% ... and that is for one day.

If yesterday were a Friday, you might have been able to buy that put for $.60. Think of the return on that position.

But it all starts with understanding how and where the market could reverse.

With the move up in the VIX yesterday, it is still under the upper band on the daily chart. The upper band is 21.12. The key at the moment will be if the VIX can break back above the upper band.

If it does, the markets should head down more.

If the VIX fails to clear the upper band, it should head down and the markets should head up.

With a close yesterday at 2,701.33, the S & P 500 is still above the support level from last week's price bar, which is in the 2,684 to 2,688 area.

Should the market continue lower, watch to see if this area holds as support.

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
Minor level: 10.94

The VIX closed at 20.02. At this point, minor resistance is at 21.88.
As I mentioned above, watch to see if the VIX can clear 21.12, which is the upper band on the daily chart.

On the downside, the key level remains at 18.75. Two closes under 18.85 and the VIX should drop back to 12.50.

$SPX:

Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
Major level: 2,734.40 <
Minor level: 2,714.88 **
Minor level: 2,675.83
Major level: 2,656.30
Minor level: 2,636.75

With a close at 2,701.33 there are a few levels to watch today. Of course, on the downside, there is the 2,714.88 confirming line. If the S & P 500 closes under 2,714.88 today, it should head to 2,656.

2,695.30 is a minor support level. If this level is tested, I would expect support to hold. If 2,695.30 is violated, the next support level on the downside is 2,646.50.

Pre open, the S & P 500 is trading about 10 points to the upside.

QQQ:

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
Minor level: 160.94
Minor level: 157.81
Major level: 156.25

The QQQ closed at 164.82. The QQQ should test the 168.75 level.

And minor support continues at 162.50. A break above 165.63 and the QQQ should head higher.

163.77 is also a support area.

IWM:

Major level: 159.38
Minor level: 158.60
Minor level: 157.03
Major level: 156.25
Minor level: 155.47
Minor level: 153.91
Major level: 153.13 <
Minor level: 152.35 **
Minor level: 150.78
Major level: 150.00

The IWM closed at 152.24. Biased for a retest of 150.

I would expect strong support at the 150 level. But, watch the minor 151.56 level as it could offer support.

TLT:

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
Minor level: 116.80 **
Minor level: 116.02
Major level: 115.63

The TLT broke and closed at 116.74. A close today under 116.80 and the TLT should test 115.63.

115.63 is a key level and the TLT breaks under this level, it should head lower. But, the TLT is oversold short term.

GLD:

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

The GLD closed at 125.66. The low for the day came to within 44 cents of the major 125 level.

125 should be strong support. A break under this level tells us the GLD should head lower. Watch to see if the GLD breaks under 125.

XLE:

Minor level: 76.95
Major level: 76.56
Minor level: 76.17
Minor level: 75.39
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 <
Minor level: 67.97
Minor level: 66.41
Major level: 65.63 <

The XLE closed at 66.61. I would expect the 65.63 level to be tested. This level should offer support.

Having said that, the XLE broke under the midband on its daily chart. That level is 67.25. And it should now be resistance.

FXY:

Major level: 91.41
Minor level: 91.22
Minor level: 90.83
Major level: 89.06
Minor level: 88.87
Minor level: 88.48
Major level: 88.28 <
Minor level: 88.09
Minor level: 87.70
Major level: 87.50
Minor level: 87.31
Minor level: 86.92

The FXY closed at 89.04. This is the second lower close after breaking under the upper band.

I would expect support at 88.28.

AAPL:

Major level: 175.00
Minor level: 174.22
Minor level: 172.66
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

Apple closed at 171.07. Apple needs to clear 171.88 to head higher. And if Apple closes under 171.10 today, a test of 168.75 would be the next minor move.

The 166 area should be strong support from last week's weekly price bar. And 165.63 is a major support level.

WATCH LIST:

Bullish Stocks: LMT, BA, RTN, MA, CME, PANW, FFIV, RHT, ATHN, WDAY, EW, DATA, SFLY, TPR

Bearish Stocks: ULTA, AAP, EXPE, THS, CTB, PDCO, MXL, SKT, GOV

Be sure to check earnings release dates.