January 17, 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.

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
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SNAP Long at $15.20
Premium Collected - $3.55

AMC Long at $15.27
Short January $16 Call @ $0.27
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UNIT Long at $17
Short January $17.50 Call @ $0.35

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Does yesterday mark the end of the bull market?

It was certainly beginning to look like it. The market gapped up almost 13 points at the open and ran to a high of 2,807.54.

You should recognize that the high was within 5 points of our objective, which is 2,812.50.

After hitting the high, the S & P 500 sold off all day and dropped to a low of 2,768.64. So, from the hgh to the low, the market dropped almost 39 points.

We had been cautious because of the VIX and S & P 500 divergence. In fact, last Thursday and Friday, both the VIX and the S & P 500 closed to the upside.

And last week, they both closed to the upside as well.

As you know, when you see this relationship it does make you alert to a possible pullback.

Back to the question I started today's update with ... does this mark the end of the bull market?

No, I don't think so.

Though the market is overbought, for a deep pullback to happen, I would have expected a close under the upper band on the daily chart.

The upper band is 2,771.34. And yesterday's close was 2,776.42, or about 5 points above the upper band.

And on yesterday's gap, price got above the upper band on both the 30 minute and 60 minute charts. So, the pullback corrected this short term overbought condition.

And both short term charts still remain in uptrend formation. With price getting above the upper band on the short term charts and the short term charts being in uptrend formations, it would indicate that the market should rally once it finds support.

The VIX rallied to almost 12.50 yesterday. It hit a high of 12.41. For the market to reverse to the upside, the VIX will have to reverse to the downside.

Pre open, the S & P 500 is trading about 9 points to the upside. Watch the 2,788 area for support or resistance today.

Here are the Key Levels for the Markets:

$VIX:

Major level: 14.06
Minor level: 13.67
Minor level: 12.89
Major level: 12.50 <
Minor level: 12.11
Minor level: 11.33
Major level: 10.94
Minor level: 10.55
Minor level: 10.16
Major level: 9.38
Minor level: 8.99
Minor level: 8.20
Major level: 7.81

The VIX closed at 11.66, jumping 14.76%. At this point, I would expect 12.50 to offer resistance.

For the bull market to continue, I would not expect the VIX to exceed 12.50. If the VIX takes out 12.50 and hits 14.06, it would make me concerned that this sell off could be a bit deeper.

10.94 should offer support. And 12.50 should be resistance.

$SPX:

Major level: 2,812.50 <
Minor level: 2,792.98
Minor level: 2,753.93 **
Major level: 2,734.40
Minor level: 2,724.23
Minor level: 2,705.07
Major level: 2,695.30
Minor level: 2,685.55
Minor level: 2,666.05
Major level: 2,656.30
Minor level: 2,646.53

2,812.50 is still the active objective. And yesterday's high came within 5 points of the target.

This is a key level, because if the S & P 500 cannot clear 2,812.50, a pullback should happen.

2.773.40 is a minor support level and 2,797.90 is minor 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: 155.47
Minor level: 153.91

The QQQ closed at 164.02. 162.50 is support.

If the QQQ can clear 164.06, look for this level to act as support.

IWM:

Major level: 162.50
Minor level: 161.72
Minor level: 160.16
Major level: 159.38 < Target Hit!
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

The IWM closed at 156.14. The IWM did hit the 159.38 objective before reversing. the high for the day was 159.41.

If the IWM can get back above 156.25, look for this level to act as 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: 124.61
Minor level: 123.83
Major level: 123.44
Minor level: 123.05

The TLT closed at 125.04. The TLT hit the 125 level we were expecting. At this point, the TLT would need two closes above 125.78 to move higher.

124.61 should offer support.

GLD:

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
Minor level: 121.10
Minor level: 119.53
Major level: 118.75
Minor level: 117.96

The GLD closed at 127.17. The GLD should test 128.13.

126.56 should offer minor support.

XLE:

Major level: 78.13 <
Minor level: 77.74
Minor level: 76.95
Major level: 76.56
Minor level: 76.17
Minor level: 75.39
Major level: 75.00
Minor level: 74.61
Minor level: 73.83
Major level: 73.44
Minor level: 72.66

The XLE closed at 76.44. 78.13 should be the objective. And if the XLE can take out 78.13, it should head higher.

The XLE is above the upper band on the daily chart, so it is overbought short term.

75 should offer support.

FXY:

Major level: 87.50
Minor level: 87.31
Minor level: 86.92
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

The FXY closed at 86.94. The FXY took out the 86.72 objective. A close today above 86.92 and the FXY should test 87.50.

86.72 should offer strong support. And resistance is at 87.50.

AAPL:

Major levels for Apple are 178.13, 175, 171.88, 168.75, 165.63, and 162.50.

Apple closed at 176.19. The 175 level should offer strong support.

175.78 should offer short term support.

WATCH LIST:

Bullish Stocks: AMZN, GOOGL, SHW, TSLA, BA, NOC, SPY, FDX, FLT, RTN, AMGN, CMI, AAPL, EOG, JPM, WDAY

Bearish Stocks: SLG, KMB, KHC, EPR, NGG, JACK, O, NUVA

Be sure to check earnings release dates.