July 23, 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

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DUST Long $4.50
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SNAP Long at $14.54
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BERY Long Sept $50.00 Call at $2.70

OI Long Nov $17 Call for $1.25
OI Short Nov $20 Call for $0.35

VALE Long at $13.50
VALE Short July 27th - 13.50 Call at $0.21

FEYE Long at $16.69
FEYE Short July 27th - $17.00 Call at $0.25

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Yesterday the S & P 500 closed slightly to the downside. It closed down for the day 2.66 points, at 2,801.83. This was back under the minor 2,805.20 level.

But, at this point, we have had two closes above the minor 2,805.20 level, so I am still biased for a move up to 2,841.80.

This also sets up a situation where I would expect support at the major 2,793.00 level. And if that can't hold, I would expect that 2,780.78 would.

And once again, the daily range contracted. Friday's range was only 9.69 points.

That is about one half the daily average true range, which is now 21.02 points.

In general, the market has contracted significantly. As a point of reference, the daily average true range was about 50 points back in April of this year. It is now less than one half that amount.

This tells us is that we should expect an expansion. Expansions usually follow contraction. And after periods of expansions, you usually see contractions.

The question is which direction will the market expand?

Before I address that question, let me mention that the resistance area from Friday's daily price bar is in the 2,803 to 2,805 area.

If we scope out and look at the weekly price bar for the S & P 500, we can see that it is very similar to Friday's price action.

In fact, last week formed an almost perfect narrow range doji.

The week opened at 2,801.43 and closed at 2,801.83. And the range for the week was only 27.52 points. The weekly average true range is 60.96 points.

So, last week's range was only 47% of the average.

The doji bar means indecision. Or it can also signify a pause before a continuation.

The last time we had a doji price bar, the S & P 500 pulled back for two weeks.

With both the 30 minute and 60 minute charts in uptrend formations, I would expect another rally if the market does pullback.

Technical support from the short term charts are in the 2,762 to 2,764 area. At least this is where I would expect strong support to come in.

With the weekly doji price bar, we need to monitor the high, close and low.

Respectively, those levels are 2,816.76, 2,801.83 and 2,789.24.

A close above the high would be bullish and a close under the low bearish.

A trade strategy to consider at the moment is a straddle or strangle. This structure has you holding both calls and puts.

I say this because the price action is predicting an expansion and this structure would have you positioned for a move in either direction.

Pre open, the S & P 500 is trading slightly to the downside.

Earnings continue this week.

GOOGL reports this afternoon, after the close. Amazon reports this?Thursday, after the close. And Facebook reports this Wednesday, after the close.

These reports will be in focus.

Continue to monitor the longer term levels for the market.

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 12.86. Yesterday's high was 13.58. The VIX managed to move 30 cents above minor 13.28 level, but closed back under it.

This is what we expected. And I would still expect resistance at 13.28 until it is violated.

On the downside, the key level is 12.11. If the VIX breaks under this level, I would expect it to head lower.

SPX:

Major level: 2,841.80
Minor level: 2,829.60
Minor level: 2,805.20 **
Major level: 2,793.00 <
Minor level: 2,780.78
Minor level: 2,756.33
Major level: 2,744.10
Minor level: 2,731.90
Minor level: 2,707.50
Major level: 2,695.30

Minor support should be at 2,795.40 and 2,783.20.

On the upside, resistance is at 2,819.80.

QQQ:

Major level: 187.50
Minor level: 185.94
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

The QQQ closed at 178.99. The 181.25 level is still the objective, but resistance is at 180.47. And Friday's high was 180.17.

Like the S & P 500, both short term charts are still bullish.

178.13 should now be minor support.

IWM:

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
Minor level: 164.85
Minor level: 163.28
Major level: 162.50

The IWM closed at 168.48. 170.31 is a minor resistance level. If the IWM clears 170.31, it should head higher.

Major support is at 166.41. And minor support is at 167.19.

Both short term charts are on uptrends, so look to buy on support.

TLT:

Major level: 125.00
Minor level: 124.61
Minor level: 123.83
Major level: 123.44 <
Minor level: 121.49
Minor level: 120.70 **
Major level: 120.31
Minor level: 119.92
Minor level: 119.14
Major level: 118.75

The TLT closed at 120.76.

The TLT closed under the midband, which is 121.26. This level should now be resistance.

120.31 is minor support. And 119.53 should be major support.

GLD:

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 GLD closed at 116.56. The GLD bounced off the lower band on its daily chart. The lower band is 115.70.

114.06 should offer support.

On the upside, 118.75 should still be resistance.

XLE:

Major level: 78.13 <
Minor level: 77.35
Minor level: 75.78 **
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

The XLE closed at 74.89, just under the major 75.00 support level.

At this point, 74.22 is the key price level. IF the XLE breaks under 74.22, I would expect a drop to 71.

FXY:

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
Minor level: 84.97
Minor level: 84.58
Major level: 84.38

The FXY closed at 85.80. The FXY has now moved one level in two days.

We were expecting a bounce and that is what happened.

I have said this ... "Consider an unequal straddle or strangle with a bullish bias. Email me if you don't understand the strategy."

If you put this on, email me and let me know.

86.33 should be minor resistance.

AAPL:

Major level: 200.00
Minor level: 198.44
Minor level: 195.31
Major level: 193.75 <
Minor level: 192.19 **
Minor level: 189.06
Major level: 187.50
Minor level: 186.72
Minor level: 185.16
Major level: 184.38

Apple closed at 191.44. 190.63 should be strong support.

The objective for Apple should still be to the 193.75 level.

The 60 minute chart is very close to crossing into an uptrend.

WATCH LIST:

Bullish Stocks: GWW, HUM, COST, FB, SNA, IBM, V, EW, CRI, DIS, GRUB, DATA, DXCM, SQ, DNKN

Bearish Stocks: TSLA, NXPI, SMG, BG, CAH, CTRP, EBAY, TSRO

Be sure to check earnings release dates.