July 24, 2020 - MDT Pro Tips

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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.

After four days of consecutive higher closes, the markets sold off. The S & P 500 closed 40.36 points lower.

The S & P closed at 3,235.66. And the high for the day was 3,279.99 or 1.21 points under the 3,281.20 objective I have been calling for.

Wednesday's daily bar closed at 87% of the range for the day. So, the expectation was that the high would be violated before the low.

And it did. Barely. Yesterday's high of 3,279.99 took out Wednesday's high of 3,279.32 by .67 points.

So, the expectation was met. After meeting the new high, the market proceeded to sell off all day and hit a low of 3,222.66.

The range for the day ended up at 57.33 points. This exceeded the daily average true range by 12%. The daily averahe true rnage now reads 51.13 points.

So, after six days of contractions, the S & P had a range greater than the average true range.

As I said, expansions follow contractions and vice versa.

The daily bar closed at 23% of the range of for the day, which suggests we will see the low violated before the high.

The low is 3,222.66. So, watch this level.

Pre open, the S & P is trading about 11 points lower. This would project to an open around 3,225 or about 2 points above the low.

Watch for the low to be taken out. If it can't, then we should see a rally, but the expectation is that the low will be violated.

The resistance area from yesterday's daily bar is in the 3,251 to 3,254 area.

The weekly price bar is shaping up with a contraction.

The range for the week, so far, is only 64.83 points. This is 42% of the weekly average true range, which is 155.21.

Assuming the week ends with a contraction, which is highly likely, it will mean that this week would be the fifth straight weekly contraction.

This suggests we will see an expansion.

The midpoint of the week so far is 3,152. Yesterday's close is about 17 under the midpoint.

A close under the midpoint would be bearish.

Support is around 3,225. If this level cannot hold, a drop to the weekly low of 3,215.16 is possible.

Here are the Key Levels for the Markets:

$VIX:

Major level: 34.38
Minor level: 33.60
Minor level: 32.03
Major level: 31.25
Minor level: 30.47
Minor level: 28.91
Major level: 28.13
Minor level: 27.35
Minor level: 25.78 **
Major level: 25.00 <
Minor level: 24.22
Minor level: 22.66
Major level: 21.88

The VIX closed at 26.08. The VIX closed 1.76 points higher for the day.

This now suggests that if the VIX closes above 25.78 today, it should test 28.13.

I have been writing about the fact that the VIX is trading right at the midband on the daily chart.

Two days ago it closed just under the midband and yesterday now back above it.

The midband is 24.72 and the VIX is now back above it.

Having said that, the 60 minute chart is bearish, so I do expect resistance to come in. The likely area will be around 29 to 30.

S & P 500:

Minor level: 3,398.35
Minor level: 3,320.25
Major level: 3,281.20 <
Minor level: 3,242.15 **
Minor level: 3,164.00
Major level: 3,125.00
Minor level: 3,085.95
Minor level: 3,007.85
Major level: 2,968.80
Minor level: 2,929.75
Minor level: 2,851.65
Major level: 2,812.50
Minor level: 2,773.45

The S & P closed at 3,235.66. The objective for the S & P should still be up to 3,281. With the S & P within 2 points of the objective, it is close enough to say it is hit.

But, the S & P did close under 3,242.15. This now implies that if the market closes under this level, the S & P should drop to 3,125.

If the market does reverse at the levels I mentioned above, a test of 3,242 would be possible.'

Technical support is around 3,225.

QQQ:

Major level: 268.75
Minor level: 267.18
Minor level: 264.05
Major level: 262.50 Hit
Minor level: 260.93 **
Minor level: 257.80
Major level: 256.25
Minor level: 254.69
Minor level: 251.56
Major level: 250.00

The QQQ closed at 258.01. The QQQ closed 6.92 lower.

This put the QQQ under the minor 260.93 level. A close today under this level and the QQQ should drop to 256.25.

I said yesterday, the key at the moment is the upper band on the daily chart. That level is 267.61. The QQQ did sell off against the upper band.

At this point, the upper band should be resistance.

Technical support is around 254.

IWM:

Major level: 156.25
Minor level: 154.70
Minor level: 151.56
Major level: 150.00 < HIT
Minor level: 148.44
Minor level: 145.31
Major level: 143.75
Minor level: 142.19
Minor level: 139.06
Major level: 137.50
Minor level: 135.94
Minor level: 132.81
Major level: 131.25

The IWM closed at 148.26. The IWM did hit the 150 objective. It hit a high of 150.20.

So iat this point, to move higher, the S & P will need to close above 151.56 to move higher.

Also, it is above the midband, which is 145.95. This level should be support. So, if it is taken out, the IWM should head lower.

The 147 area should be technical support.

TLT:

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
Minor level: 161.72
Minor level: 160.16

The TLT closed at 169.75. The TLT took out the 168.75 objective.

This was the first close above the 169.53 level. A close today above this level and the TLT should test 171.88.

168.75 should now be support. And 169 area is technical support.

GLD:

Major level: 178.13
Minor level: 177.35
Minor level: 175.78
Major level: 175.00 HIT
Minor level: 174.25
Minor level: 172.70
Major level: 171.89
Minor level: 171.11
Minor level: 169.54
Major level: 168.75
Minor level: 167.98
Minor level: 166.41
Major level: 165.63
Minor level: 164.85

The GLD closed at 177.18. The GLD took out the 175 objective.

Yesterday's high also took out the 178.13 level. And the upper band on the daily chart.

The upper band is 176.59 and the GLD closed just above it. The key now is what the GLD does now at the upper band.

XLE:

Minor level: 44.53
Major level: 43.75
Minor level: 42.97
Minor level: 41.41
Major level: 40.63
Minor level: 39.83
Minor level: 38.28 **
Major level: 37.50 Target - HIT
Minor level: 36.72 **
Minor level: 35.15
Major level: 34.37
Minor level: 33.59
Minor level: 32.03
Major level: 31.25

The XLE closed at 37.72. The XLE managed to close above the major 37.50 level. If will need two closes above 38.28 to head higher.

The 36.72 level should now be support. 37.50 should also be support.

AAPL:

Major level: 400.00
Minor level: 396.88
Minor level: 390.63 **
Major level: 387.50
Minor level: 384.38
Minor level: 378.13
Major level: 375.00
Minor level: 371.88 **
Minor level: 365.63
Major level: 362.50 <
Minor level: 359.38
Minor level: 353.13
Major level: 350.00
Minor level: 346.88

Apple closed at 371.38. Apple closed $17.71 lower. Apple breached the major 387.50 level, by about $1 before selling off.

And of course, it moved below the upper band.

A close today under 371.88 and Apple should drop to 362.50. 363 is technical support.

WATCH LIST:

Bullish Stocks: REGN, CHTR, NOW, ILMN, LRCX, ALGN, APD, RH, MKC, CMI, ITW, VRSK, CTXS, TREX, DGX, VRNS, PGR, LOGM

Bearish Stocks: VMW, ADI, AZPN, C, PLAN, APPN, NTNX, SUN