January 8, 2016 - 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
Short Jan 8th-$21 Call - $.40

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 - $1.05
Short Jan 8th-$13.75 Call

P Long $13.38
Short Jan $14 Call - $.35
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Before I begin, I need to mention that there are two open option positions that expire today.

Both are short calls.? The short $14 call on P and the short $21 call on GOGO.

With this sell off, both calls will expire worthless today and you will book the profit on the calls.

I suspect the only good news about yesterday was that we did not see a flash crash.? The S & P 500 did have a 46.49 range, which was over 150% greater than it's average true range.

There were a few events from yesterday worth mentioning.

The first is that the markets did not have a selling climax.
The down to up volume was 8.3 and I measure a climax when the down to up volume is greater than 9 to 1.

The second condition is that the S & P 500, and all major markets for that matter, all traded well under their extreme bollinger bands on their 60 minute charts.

I cannot recall seeing this extreme technical condition in quite sometime.

What I find rather coincidental is that the bottom band for the S & P 500 on the 60 minute chart is 1,968.41.

You may recall from yesterday that I mentioned if the S & P 500 closes for two consecutive days under 1,968.80, the S & P should drop to 1,906 or possible 1,875.?

So, today becomes very key in determining the next move for the markets.

The first of course, is if there is a close today under 1,968.80 and the conditions that should follow.

Because the markets all traded well under their bottom bands, I would fully expect a retest of the bottom bands once they manage to close back inside them.

Pre open, the S & P 500 is getting the expected bounce and is up about 25 points as I write this.

If the S & P can regain the lower band and close above 1,968.80 today, it will still need two consecutive closes under 1,968.80 to confirm a move down to 1,875.

Here are the key levels for the markets.
?
VIX:?

Major level - 31.25
Minor level - 29.68
Minor level - 26.56
Major level - 25.00
Minor level - 23.44
Minor level - 20.31
Major level - 18.85
Minor level - 17.19

The VIX hit the 25 level yesterday and closed at 24.99, just one penny under the level.? I would expect support on the VIX to be around the 20.31 to 23 level.

S & P 500 Cash Index:?

Major level - 2,000.00
Minor level - 1,992.18
Minor level - 1,976.52
Major level - 1,968.80
Minor level - 1,960.88
Minor level - 1,945.33
Major level - 1,937.50

Watch the key 1,968.80 level today.? A close today under that level carries bearish implications.

1,969 level is key.? Two closes under this level and the S & P will want to drop to 1,875 or 1,900.

If the S & P can get above 1,968.80, look for it to act as support.? Resistance should be at 1,976.

Nasd 100 (QQQ):?

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
Minor level - 105.47
Minor level - 103.91
Major level - 103.13

The QQQ did close under the 106.25 level yesterday, closing at 104.87.? A close today under 105.47 and the QQQ should drop to 103.13.

Resistance should be at 107.

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 TLT could not close above 122.66 yesterday.
Look for a pullback.

GLD:

Minor level - 107.03
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

The GLD came within a penny of the 106.25 level.
At this point 103 should be support.

The next key level to the upside is 107.03.

XLE:

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

Watch the 56.25 level.? If this price is taken out, EXPECT lower prices to follow. But, it should be strong support.

The XLE came within 29 cents of the 56.25 level.
Looks like it will bounce from this oversold condition.

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.?

Apple broke under the lower band on the daily chart. Quite frankly, this shows you how weak Apple is trading.? Based on this, expect another round of selling after a minor rally.

And I would expect a bounce from this oversold condition.
Will be monitoring this closely for short opportunities.

Watch list:
Bullish Stocks: FSLR, STZ, DLR

Bearish Stocks: CMG, CXO, SLB, AAPL, ZBRA, CFR, WSM, KEX, JWN, RY, MGA, KORS, RH

Be sure to check earnings release dates.