May 18, 2017 - 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
Total Premium Collected $0.70

DYN Long at $12.55
Premium Collected $0.48

COWN - Long at $14.95

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The S & P 500 had the steepest decline in quite a long time, closing 43.64 points to the downside, at 2,357.03.

The VIX rallied almost 50% in one day.

There are two questions that need to be addressed about this recent sell off.

The first is this.? Could this have been predicted?

The only clue that something was going to happen occurred on last Friday and this past Monday.

Last Friday, both the VIX and the S & P 500 closed to the downside.? And this past Monday, they both closed to the upside.

This of course is a rare phenomenon.? They usually close opposite each other. And quite frankly, I have not found another instance in the data set I keep on these indexes to determine what should follow.

In other words, I have never seen this set up before.

But the fact that they both closed in the same direction suggests that something unusual would occur.

Also, the down to up volume picked up on Tuesday.

The second question we need to ask is if this is the end of the bull market.

To answer that we need to look at a few things.? The first is the upper band on the monthly chart.? The upper band now reads 2,349.22.

Yesterday closed at 2,357.03, so it is still above the upper band.? I don't think a bear market begins until the S & P 500 closes under the upper band.

But, as I have been saying, this is a price level to watch.

If we look at our resistance levels, you can see that the S & P 500 broke through 2,375.

A two level drop would bring it to 2,343.80.? If this level holds as support, it would mean the bull market would still be intact.

A three level drop to 2,312.50 would make me a bit concerned.? Especially if it dropped to 2,312.50 and rallied to 2,343.80 and failed.

As I have said on a few occasions, counter trend moves usually do not exceed two levels.

By having an expectation of what should happen, we can create scenarios for what does happen in real time.? And be on the lookout if something does not go in accordance with our plan.

Here are the Key Levels for the Markets:

$VIX:

Minor level: 16.02
Major level: 15.63 <
Minor level: 15.24
Minor level: 14.45
Major level: 14.06
Minor level: 13.67
Minor level: 12.89
Major level: 12.50
Minor level: 12.11
Minor level: 11.33

The VIX had a massive spike of 46% yesterday, closing at 15.59.? It hit the 15.63 level.

The rally in the VIX has moved 4 levels from the 9.38 level.? The next level after 15.63 is 17.19.? Two closes above 16.02 confirms the move up to that level.

I would expect strong resistance at 18.75.

Watch the VIX for signs of reversal to the downside.

$SPX:

Minor level: 2,414.10
Major level: 2,406.30
Minor level: 2,398.48
Minor level: 2,382.82
Major level: 2,375.00
Minor level: 2,367.20 ***
Minor level: 2,351.60
Major level: 2,343.80
Minor level: 2,336.00

A close today under 2,367.20 and the downside objective would be to 2,343.80. 2,375 and 2,367 should be resistance.

2,351.60 could offer minor support.

QQQ: ?

Major level: 140.63
Minor level: 139.85
Minor level: 138.28 **
Major level: 137.50 <
Minor level: 136.72
Minor level: 135.16
Major level: 134.38

The QQQ closed at 136.07, down 2.54% for the day.? A close today under 136.72 and the QQQ should test 134.38.

A two level drop brings the QQQ to 134.38.

I do expect a rally on the QQQ after it pulls back.

IWM:

Minor level: 141.41
Major level: 140.63
Minor level: 139.85
Minor level: 138.28 ***
Major level: 137.50 <
Minor level: 136.72
Minor level: 135.16
Major level: 134.38
Minor level: 133.60

The IWM dropped even more than the QQQ.? It fell 2.7% on the day, closing at 134.89.? A break under 134.38 would be bearish for the IWM.

Watch to see if 133.60 can hold.

TLT: ?

Major level: 125.00
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: 117.96 ?

A close today above 122.66 and the TLT should test 125.? I would expect resistance at 125.

A break through 125 tells us the TLT should head higher.

GLD: ?

Minor level: 122.66
Major level: 121.88
Minor level: 120.32
Minor level: 119.53 ***
Major level: 118.75
Minor level: 117.97
Minor level: 116.41
Major level: 115.63
Minor level: 114.85
Minor level: 113.28
Major level: 112.50

A close today above 119.53 and the GLD should test 122.66.

122.66 is a key level. If the GLD reverses at this level, I would expect a sharp downmove.

XLE:

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

67.19 is the key level on the downside.? Two closes under 67.19 and the XLE could drop to 62.? Watch to see if 65.63 can hold as support. If not, the XLE could drop to 62.

FXY:

Major level: 87.50 <<
Minor level: 87.11
Minor level: 86.33 ***
Major level: 85.94 ?
Minor level: 85.55
Minor level: 84.77
Major level: 84.38
Minor level: 83.60
Minor level: 83.20
Major level: 82.81

A close today above 86.33 and the FXY should test 87.50.? 87.50 should be a key level.? It should be resistance.? But if it can get through 87.50, it should head higher.

AAPL:

Major levels for Apple are 162.50, 156.25, 150, 143.75, and 137.50

I would not expect Apple to drop under 143.75. Yesterday, it closed just above the 150 level.? A break under 143 and Apple should head lower.

WATCH LIST:

Bullish Stocks: AMZN, REGN, TSLA, ULTA, AVGO, HUM, BIDU, ANTM, NFLX, CMI, BABA, ADSK, SWKS, V, IRBT

Bearish Stocks: SPG, SJM, CLB, CCI, VRSK, ETR, CL, ESRX, GIS, VFC

Be sure to check earnings release dates.