October 5, 2018 - MDT Pro Tips A.M.

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Yesterday was the classic trend day.  Albeit, a bearish trend, but it did trend all day.

The market gapped down at the open 6.15 points and proceeded to head down all day.

The high for the day was at the open, which is a classic trend day.

The question to examine is how could we have anticipated this sell off?

There are a couple of things to look at.  The first is that on Tuesday, the market had a contraction.

We know that an expansion usually follows a contraction.  And certainly yesterday qualified as an expansion.  The range for the day was 35.86 points.  And the daily average true range is 19.86.

The range yesterday was 180% of the average, which certainly qualifies it as an expansion.

The other factor is the VIX.  I have been saying that the VIX needs to clear the 12.50 level for it to head higher ... and the markets to head lower.

The VIX opened at 12.42 yesterday and in the first bar closed at 12.54, or above the 12.50 level.

After that, the VIX proceeded to head up all day. It ultimately hit a high of 15.84 before settling at 14.20.

The final fact to consider is the divergence between the S & P 500 and the VIX.

The divergence is created when they both close in the same direction.

This happened on Thursday September 20th, when they both closed to the upside.

The next day, they both closed to the downside.

This signal can come before the selling pressure and in this instance it did.  But, it is always a warning that a change in trend is coming.

But, the second day of the divergence, on Friday September 21st, was the exact top in the market.  That was the day the market topped at 2,940.91.

And this signal actually caught the top.

So, it's something to pay attention to.

For the day, the market closed 23.90 points to the downside, at 2,901.61.

The close percentage was 49%, so late in the day, the market managed to rally back from its oversold condition.

The midpoint of the weekly bar so far is 2,911.94.  And yesterday's close was about 10 points under it.

Watch this level on a rally.

The resistance level from yesterday's daily bar is in the 2,902 to 2,910 area.

The non farm payroll report will be released at 8:30 EST.

Here are the Key Levels for the Markets:

$VIX: 
 
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  
Minor level:   7.81
Major level:   6.25

The VIX closed at 14.20.  The 14.06 level is a key level today.  A close today above it and the VIX should test 18.75.

14.84 is a strong resistance level and if the VIX clears it, look for it to head higher.

12.50 should now be support.

SPX: 

Major level: 2,988.30 
Minor level: 2,976.10
Minor level: 2.951.70
Major level: 2,939.50 
Minor level: 2,927.28 **
Minor level: 2,902.83 <
Major level: 2,890.60 
Minor level: 2,878.40 
Minor level: 2,854.00 
Major level: 2,841.80 

Minor support is at 2,895.50.  A break under this level and I would expect the S & P 500 to drop to 2,871 to as low as 2,860.

On the upside, watch the minor 2,907.70 level.

On the downside, the minor support level is 2,895.50.

The short term intra day 30 and 60 minute charts still remain bullish.  Technical resistance is now around 2,910. 

QQQ:  

Major level: 193.75
Minor level: 192.19
Minor level: 189.06 
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 

The QQQ closed at 182.38. The QQQ closed one cent above the minor 185.94 level.

Support should come in at 181.25.  And resistance is at 184.38.

Both 30 minute chart and the 60 minute charts are bullish. Technical resistance is now at 184.

IWM:

Major level: 168.75  
Minor level: 167.19
Minor level: 164.06
Major level: 162.50 <
Minor level: 160.94
Minor level: 157.81
Major level: 156.25

The IWM closed at 163.64.  Watch to see if the IWM holds at the 162.50 level.

If it can't I would expect a drop to 156.25.

164.06 is a short term resistance level. 

The IWM is the only index still in downtrends on the 30 and 60 minute charts.  Technical resistance is at 168.

The IWM is trading under the lower bands on both the 30 and 60 minute charts.  Short term oversold and a bounce should be forthcoming.

TLT:  

Major level: 115.63
Minor level: 115.24
Minor level: 114.45
Major level: 114.06
Minor level: 113.67
Minor level: 112.89
Major level: 112.50

The TLT broke closed at 114.02.  Short term, the TLT is oversold and could bounce.

Two closes under 113.67 and 112.50 should be the objective.

Short term charts remain bearish.  Technical resistance is at 117.  

The TLT is sitting at the bottom band on the 30 minute, which is 113.85.

GLD:  

Major level: 117.19 
Minor level: 116.80
Minor level: 116.02 
Major level: 115.63 
Minor level: 114.85 
Minor level: 113.28 **
Major level: 112.50 <
Minor level: 111.72
Minor level: 110.16
Major level: 109.38

The GLD closed at 113.48.  112.50 should offer strong support.  But if the GLD breaks under 112.50, it could drop to as low as 100.

Watch the 112.50 level today.

Minor resistance should be at 114.06.  

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 77.17.  The XLE is within 50 cents of the 78.13 level.

If the XLE can close above 78.13 for two days, it should move up to 87.

Both short term charts are in uptrends.  Technical support is at 75 and 76.56.

FXY:

Minor level: 84.97 
Minor level: 84.58
Major level: 84.38
Minor level: 84.18 
Minor level: 83.79 **
Major level: 83.59 <
Minor level: 83.40
Minor level: 83.01
Major level: 82.81

The FXY closed at 83.97.  A close today above 83.60 and the FXY should bounce up to 84.38.

The FXY is oversold.  On the downside, I do not expect the FXY to break under 82.81.

If it does, expect it to head lower.

85.16 should be resistance now.

Short term charts remain bearish.  Technical resistance is right at 85.

AAPL:
 
Major level: 231.25
Minor level: 229.69
Minor level: 226.56 **
Major level: 225.00 <
Minor level: 223.44
Minor level: 220.31
Major level: 218.75
Minor level: 217.19
Minor level: 214.06
Major level: 212.50

Apple closed at 227.99.  Apple took out the 231.25 level we were looking for.

225 should be a support level.

Short term charts remain bullish.  Technical support is at 223.

WATCH LIST:

Bullish Stocks: AMZN, REGN, ALGN, NFLX, BA, FLT, MA, ADBE, EW, ADP, V, ALXN, FANG, PTC, DIS, SQ, ESRX, XLNX, WBA

Bearish Stocks: FDX, GS, MLM, LRCX, WYNN, SMH, KLAC, ALL, ALNY, JACK, PRGO, MNST, KHC, WRK

Be sure to check earnings release dates.