May 30, 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.

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With political instability in Italy, the markets sold off hard yesterday. For the day, the S & P 500 closed to the downside 31.47 points. It closed at 2,689.86.

It could have been worse, with the low for the day about 14 points under the close.

But, this move was not that unexpected. And here is why.

First off, I mentioned yesterday that we had two consecutive weeks of contractions. And the last two weeks of weekly price bars formed doji bars. This often is interpreted as indecision.

Contractions are usually followed by expansions.

And the second reason is that the VIX traded back to its all time low support level of 12.50.

It seems you can set your watch to the 12.50 level.

The final indication for a sell off was that on Thursday May 24th, both the S & P 500 and the VIX close to the downside. This divergence often precedes a change in direction. It may not signal a change of trend, but it often leads to a change of the immediate direction in the market.

The question now is what should the market do?

With the S & P 500 closing at 2,689.86, the close was about 25 points below the downside confirming line of 2,714.88.

This implies that if the S & P 500 closed under 2,714.88 today, it should test the 2,656.30 level. If the market can recoup 2,714.88 today, it would void that theory.

A drop to the 2,656.30 level would be a normal pullback. The market could drop to 2,578.10 and it would still be considered a normal market pullback. In other words, if it went that far, I would still feel the bull trend is intact.

Pre open, the S & P 500 is trading about 9 points to the upside. This projects an open around 2,699.

Support levels from yesterday's daily price bar is in the 2,693 to 2,697 area. Watch this area if the market opens above this range.

Also, the midband on the 60 minute chart is 2,684. The market did trade under it yesterday, but managed to recoup that level by the close. Watch for support at that level.

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

With the sell off yesterday, the VIX spiked up to hit a high of 18.78 or three cents above the major 18.75 level, before dropping to close at 17.02.

With a close under 17.19, this now implies that if the VIX can close under that level today, it should drop to 12.50.

14.06 should be minor support.

$SPX:

Major level: 2,812.50
Minor level: 2,792.98
Minor level: 2,753.93
Major level: 2,734.40 <
Minor level: 2,714.88 **
Minor level: 2,675.83
Major level: 2,656.30
Minor level: 2,636.75
Minor level: 2,597.65
Major level: 2,578.10
Minor level: 2,558.58

2,695.30 should continue to be a minor support level. And 2,675 as well.

On the upside, watch to see if the S & P can reclaim 2,714.88.
2,690.40 is a key level on the downside. A close under that level today would also confirm a move down to 2,656.

QQQ:

Major level: 175.00 <
Minor level: 171.88
Minor level: 165.63 **
Major level: 162.50
Minor level: 159.38
Minor level: 153.13
Major level: 150.00
Minor level: 146.88
Minor level: 140.63
Major level: 137.50

The QQQ closed at 168.97. Support should still be at the 168.75 level. On the upside, look for resistance at the 169.92.

Like the S & P 500, the 30 minute and 60 minute charts remain bullish. Definitely stronger than the S & P 500 index.

IWM:

Major level: 165.63
Minor level: 164.85
Minor level: 163.28
Major level: 162.50 <
Minor level: 161.72 **
Minor level: 160.16
Major level: 159.38
Minor level: 158.60
Minor level: 157.03
Major level: 156.25
Minor level: 155.47

The IWM closed at 161.52. To move lower, the IWM needs to close today under 161.72. The objective then becomes 159.38. Reclaiming 161.72 voids that.

164.06 should offer resistance. And 160.94 should offer minor 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
Minor level: 118.36

The TLT surged and closed at 122.24. The TLT is within 90 cents of the major 123.44 level.

Yesterday, the TLT also closed above the midband on the daily chart. That price level is 121.95, which should now offer short term support.

Watch to see if the TLT can hold the midband.

GLD:

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
Minor level: 122.27
Major level: 121.88
Minor level: 121.49
Minor level: 120.70
Major level: 120.31

The GLD closed 123.19, closing just under the major 123.44 level again. 125 should offer strong resistance on the upside.

The midband on the daily chart is 123.01. Watch this key level. A break under this level and it should be resistance.

XLE:

Major level: 81.25 <<<
Minor level: 80.47
Minor level: 78.91
Major level: 78.13 <
Minor level: 77.35
Minor level: 75.78 **
Major level: 75.00
Minor level: 74.22
Minor level: 72.66

The XLE closed at 74.35 yesterday. The XLE will need two closes under 74.22 to drop to 71.88.

The 75 level should now offer resistance.

FXY:

Major level: 89.06
Minor level: 88.87
Minor level: 88.48
Major level: 88.28
Minor level: 88.09 **
Minor level: 87.70
Major level: 87.50
Minor level: 87.31
Minor level: 86.92
Major level: 86.72
Minor level: 86.53

The FXY closed at 88.13, closing five cents above the minor 88.09 level. If the FXY can clear 88.28 and close above it, I would expect a move up to 91 area.

Two closes above 88.48 and the objective becomes 89.

AAPL:

Major level: 190.63
Minor level: 189.85
Minor level: 188.28 **
Major level: 187.50
Minor level: 186.72
Minor level: 185.16
Major level: 184.38

Apple closed at 187.90. Apple still held above the 187.50 support level. Watch to see if the Apple can hold 187.50. If it can't profit taking should set in.

Both short term charts, the 30 & 60 minute remain bullish.

WATCH LIST:

Bullish Stocks: GOOGL, BA, NFLX, FDX, NVDA, PANW, LRCX, BABA, MA, AAPL, AET, FFIV, DE, ACN, CAT, ATHN, V, UTX, MON, KLAC, CRM

Bearish Stocks: TSLA, NTES, AMT, LOGM, CASY, BCO, CAH, MDP, RRGB

Be sure to check earnings release dates.