October 19, 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

APA Long Oct $47.50 Call at $3.45

SNAP Long at $15.20
SNAP Short Oct 20th - $16.00 Call at $0.65
Premium Collected - $1.20

AMC Long at $15.27
AMC Short Oct $16 Call at $0.43

THC Long at $14.63
THC Short Oct $15 call at $0.40

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The S & P 500 closed at 2,561.26 yesterday, up 1.90 points on the day.

The range for the day was only 4.44 points, even smaller than the paltry 5.02 range on Tuesday. And now the average true range reads 9.31 points.

I can't recall the last time the average true range for the S & P 500 dropped under 10 points.

The high for the day was 2,564.11. So, the S & P 500 is now within 14 points of the 2,578.10 price objective.

But, these contractions to me, do not bode well for the markets. The question is this ... is it time short?

At this point, I would no. We would need further price confirmation before doing that. The better strategy to consider would be a straddle, where you buy both a call and a put.

Buy some time and you are positioned for a move either way.

With the market contracting and sitting at all time highs, it is time to look at some sentiment indicators.

The first one is the bullish percent index. On stockcharts.com, you can plot it with the symbol $BPSPX.

As of yesterday, it closed with a reading of 72%. For a point of comparison, it peaked at 75.60% on July 25th, and started to head down.

The S & P 500 actually topped out two days later and that began about a 70 point pullback.

The other sentiment indicator I like to look at is the % of stocks above their 200 day moving average. On stockcharts.com, you can plot with the symbol $SPXA200R.

Yesterday, that indicator read 74.40%. That indicator also topped out on July 25th with a reading of 77.2%.

Readings on these indicators over 80% are considered overbought and both are below that level. And both are below the peak at the top back in July. So, they could have more room on the upside.

By the way, both these indicators are contrarian indicators. They tend to warn you when the market gets too frothy.

The VIX is also considered a contrarian indicator. Fortunately, we can track the resistance levels to help us guage if a move should continue or not.

For example, we knew that the odds of the VIX moving higher would exist if the VIX closed above 10.16 today. As it turned out it closed at 10.07, so it would still need two closes above 10.16 to move higher.

This sets up a scenorio where higher levels should still be resistance.

Support from yesterday's daily bar should be in the 2,562 area.

The DOW was up yesterday 160 points, as compared to a 1.90 point gain for the S & P 500. This was mainly attributable to IBM reporting and jumping $12.99.

Continue to follow the resistance levels.

Here are the Key Levels for the Markets:

$VIX:

Major level: 15.63
Minor level: 14.85
Minor level: 13.28
Major level: 12.50
Minor level: 11.72
Minor level: 10.16
Major level: 9.38 <
Minor level: 8.99 **
Minor level: 8.20
Major level: 7.81

The VIX closed at 10.07. This of course, is below the 10.16 level, which means the VIX would still need two closes above that level to move up to 12.50.

Yesterday's high was just above the 10.35 minor resistance level. Look for 10.35 and 10.16 to offer resistance.

9.57 could offer support.

$SPX:

Major level: 2,578.10 <
Minor level: 2,558.60
Minor level: 2,548.85 **
Major level: 2,539.10 <
Minor level: 2,529.33
Minor level: 2,509.78
Major level: 2,500.00
Minor level: 2,492.20
Minor level: 2,476.00
Major level: 2,468.80

The objective is still to 2,578. 2,561.05 is a minor support level, and if the S & P 500 close above it today, it should move up to 2,568.40.

And 2,555.50 should also be a minor support level. 2,569 could be minor resistance.

Short term momentum remains bullish.

QQQ:

Major level: 150.00
Minor level: 148.44
Minor level: 145.31 ***
Major level: 143.75 <
Minor level: 142.18 ***
Minor level: 139.06
Major level: 137.50 5
Minor level: 135.94
Minor level: 132.81

The QQQ closed at 148.86. The QQQ continues to move up to the 150 objective. Yesterday's high was within .75 points of the 150 objective.

The minor support is at 148.83. 149.41 could offer minor resistance. Short term momentum remains bullish.

IWM:

Minor level: 150.78 **
Major level: 150.00 <
Minor level: 149.22 **
Minor level: 147.66
Major level: 146.88
Minor level: 145.32
Minor level: 144.53
Major level: 143.75
Minor level: 142.97

The IWM closed at 149.52. The IWM reclaimed the 149.22 level. 149.22 should now be support.

150.39 could offer minor resistance.

TLT:

Major level: 131.25
Major level: 130.47
Minor level: 128.91
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

The TLT closed at 125.09. 125 should be support. A break under that level the TLT should head lower.

125.39 is minor resistance and 124.80 is minor support.

GLD:

Minor level: 125.78
Major level: 125.00
Minor level: 124.22
Minor level: 122.66 <
Major level: 121.88
Minor level: 121.10
Minor level: 119.53
Major level: 118.75

The GLD closed at 121.67. The GLD broke under the 121.88 level.

The next minor level is 121.48 A break under this levels implies a move lower.

XLE:

Major level: 71.89
Minor level: 71.11
Minor level: 69.54
Major level: 68.75 **
Minor level: 67.97
Minor level: 66.41
Major level: 65.63
Minor level: 64.85
Minor level: 63.28
Major level: 62.50

The XLE closed at 67.85. The XLE continues to hold above the midband on the daily chart. The midband is 67.74. However, yesterday was the first close under 67.97. A close today under 67.97 and the XLE should drop to 65.63.

67.77 should be a minor support. A break under that level and the XLE should test 67.38. 68.36 could offer resistance.

FXY:

Major level: 89.06
Minor level: 88.67
Minor level: 87.89
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 <

The FXY closed at 85.08. A close today under 85.55 and the FXY should drop to 84.38.

84.96 should offer minor support. 85.16 should offer minor resistance.

AAPL:

Major levels for Apple are 165.63, 162.50, 159.38, 156.25, 153.13, and 150.

Apple closed at 159.76, closing down .71 on the day. 162.50 should be the objective.

160.94 should also be a resistance level. And 158.59 is minor support.

WATCH LIST:

Bullish Stocks: GOOGL, AMZN, BIIB, LMT, BIDU, BA, FDX, MMM, ALGN, RTN, FB, ASML, PANW, MA, URI, JNJ, CAT, RHT, CHKP, UTX, ADSK, V, KLAC

Bearish Stocks: ULTA, DIS, AAP, RL, KHC, WBA, TSCO, DXCM, GE, AOBC, CCJ, BBBY

Be sure to check earnings release dates.