Since your CY8C5868AXI-LP kit is not being powered externally, your settings are correct. It should ideally be acquired in both reset and power cycle mode. Anyways, since reset isn't working for you, can you please try Power Cycle mode and select 5V as shown below:
After this, click on Miniprog3 and then you can click on "Port Acquire" as shown below:
You should be able to see the kit detected. Then click on your kit and hit "OK/Connect" to program your device.
1) The red light (target power led) indicates that the Miniprog 3 is providing power to the kit.