9:00 a.m. (EST)

Apple (AAPL, $97.99, down $0.37) launched its first new product category in four years yesterday and, by the looks of things, the Apple Watch is going to be a hit. However, consumers will have to wait until 2015 for the slick new device.

I will skip all the snazzy details, as most Apple consumers have already checked out the latest and greatest upcoming products, including the Captain Obvious iPhone 6 and 6 Plus upgrades, along with what I was hoping for, Apple Pay. However, the news failed to inspire a weak market that came close to cracking support.

The Dow dropped 97 points, or 0.6%, to finish at 17,013 on Tuesday. The blue-chips traded to a low of 16,993 after a late-day run to get to even failed. The bulls held 17,000 into the close, but the risk to 16,800 got that much closer following the backtest to support. The good news is that the index is still less than 1% away from fresh all-time highs.

The S&P 500 sank 13 points, or 0.7%, to settle at 1,988. The index traded in the red throughout the session after falling back below the 2,000 level shortly after the open. The bears pushed a low of 1,984 and, while there was a little help at 1,985, there is still risk to 1,975. The close below 1,995 was bearish, but the S&P is only 23 points (1.2%) off of its recent peak of 2,011.

The Nasdaq fell 40 points, or 0.9%, to end at 4,552. Tech traded lower throughout the first half of trading and was holding 4,575 into the Apple news. As shares rose to $103, the index reached a “magical” peak of 4,599 but failed resistance at 4,600 by a point. Imagine that. It was the perfect bear clue a late day fade might come, as I have warned of 4,550-4,500 being tested on a close below 4,575. The bears tugged at 4,544 before the bulls held 4,550 by a bucket. This was a slightly bullish close but more neutral, as the lower lows are concerning.

The Russell 2000 gave back 14 points, or 1.2%, and went out at 1,158. The close below 1,160 was bearish, but I’ve talked about wiggle room down to 1,150 before the bulls need to get nervous. Tuesday’s low reached 1,157. Resistance is at 1,170-1,175.

The S&P 500 Volatility Index ($VIX, 13.50, up 0.84) jumped nearly 7% and ended exactly at a level that I have been warning of for the past two weeks. The bears pushed a high of 13.91, and I have talked of risk to 15 if the bears reclaimed the 13.50 level. While the close was somewhat neutral, the higher highs this week are also concerning, as any print above 15 could spark a mini-selloff. This would possibly push the VIX to 17.50-20, but I don’t believe this will happen this week (fingers crossed). Next week, maybe, but I’m looking for 15 to hold if there is continued weakness into this morning’s open.

For those of you just joining me (welcome and thanks for signing-up), the VIX has been THE most important clue I have used for a few years now to predict market direction. The bulls have been trying to get the VIX below 11.50 to confirm higher highs and pushed a low of 11.70 last week on the S&P’s run to 2,011. The bulls will need a close back below 12.50 today to keep the bears at bay.

Yesterday’s action felt bearish and, although I have warned to watch for a pullback next week, it could be happening a little early. I have been looking for one last blow-off-the-roof-type rally that would carry the bull tide through mid-September and, while I called the summer rally perfectly and the run to fresh highs, predicting exact market tops before a possible pullback is never easy.

From desk to press, futures look like this: Dow (-3); S&P 500 (-0.5); Nasdaq 100 (+0.25).

Special Notice: I will be covering the Price Targets I gave for the indexes from earlier this year in this weekend’s chart work. New subscribers can check the Feb. 24 and March 3 Pre-Market Updates to get the longer-term charts and my prediction for S&P 2,100 and Nasdaq 4,800-5,000. At the time, I had the highest price target for the indexes until Wall Street started playing catch-up over the summer. Do yourself a favor and read these two updates today. It will take 10 minutes.

In terms of open trades, we have some that were opened earlier in the summer. While the plan has been to close a majority of these trades by Friday’s closing bell, some will come down to the wire, as September options expire next Friday. If you’re just starting with us at Momentum Options, you’ll want to focus your money on the more recent trades for now, unless they are clearly noted as a hold.

The newer recommendations have December and January expirations, as I am trying to plan for a run to my year-end targets for the major indexes. Also, I have warned of weakness next week, and October is always a tricky month to trade, so I want to make sure all of my technical indicators are signaling a trend change before loading up on put options and starting the next big batch of trades.

The trades I get right make my homework look tight, but the trades that don’t work out have me going back to do more homework.

The current trading waters are rocky like I mentioned, and I will be working on a trading map over the weekend for what lies ahead, so look for that Monday morning. I’m trying to “relax” and see how the week plays out and go from there despite the volatility. If there is a pending selloff, I will tell you exactly when to start playing put options, as the chart work will give me a more definitive look on how the next six weeks are going to play out.


Momentum Options Play List

Closed Trades for Momentum Options in 2014: 75-44 – the Weekly Wrap is 25-4 (86%) for 2014 (110-11, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk. All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.

Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades. Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.


PowerShares QQQ (QQQ, $99.25, down $0.83)

QQQ October 102 calls (QQQ141018C00102000, $0.43, down $0.15)

Entry Price: $0.52 (9/5/2014)

Exit Target: $0.80 and $1.05 (limit order to close half at 80 cents)

Return: -17%

Stop Target: None

Action: The 52-week high of $100.31 was set last week, and I’m looking for a run to $102 over the near-term. I have planned to be out of this trade by Friday win, lose or draw.

I have set two exit targets. I would like to close half the trade at 80 cents and the other half at $1.05 (or better) this week. Support for QQQ shares is at $98, with backup at $97 and the 50-day moving average.


iShares Russell 2000 (IWM, $115.18, down $1.38)

IWM October 120 calls (IWM141018C00120000, $0.40, down $0.28)

Entry Price: $0.62 (9/5/2014)

Exit Target: $1.25

Return: -35%

Stop Target: None

Action: I have talked about the small-caps needing to clear 1,180, which is the $118 level on the iShares. If cleared, a run to 1,200 for the index, or $120 for the iShares, is in the mix. Support is at $115 and the 50-day moving average. Yesterday’s low was $115 on the dot.


Flextronics (FLEX, $11.13, down $0.05)

FLEX October 12 calls (FLEX141018C00012000, $0.09, down $0.01)

Entry Price: $0.07 (9/5/2014)

Exit Target: $0.15-$0.25

Return: 29%

Stop Target: None


FLEX January 11 calls (FLEX150117C00011000, $0.75, down $0.05)

Entry Price: $0.68 (9/5/2014)

Exit Target: $1.50+

Return: 12%

Stop Target: None

Action: Near-term resistance is at $11.25 and, if cleared, could lead to a run at fresh 52-week peaks again. Yesterday’s high was $11.19.

I believe shares are going to make a strong move past $12 in the coming weeks, $14 by year-end. There is risk to $10.75-$10.50 on a drop below $11.

Previous Notes:

Shares got a nice pop on 9/3 after shareholders approved the company to purchase up to 20% of its stock, or up to $500 million. Over the past 4 years, Flextronics has spent $1.7 billion to buy back nearly 250 million of its shares.

Obviously, management and shareholders continue to see the hidden value I saw a few weeks ago. My near-term target has been $12 but I am raising it to $14.

More…Flextronics is an assembler of Apple’s (AAPL) Mac computers and could have a bigger hand in other products as Apple moves towards having more of its devices made here at home.

There is water-cooler talk Apple is working on a spiffy 12.9″ iPad that will likely be released next year. The current buzz is about the iPhone 6 but this bigger iPad screen will dwarf the current 9.7″ and 7.9″ models. They are in talks with suppliers about development of the future iPad and FLEX could be a candidate.


Fortinet (FTNT, $26.01, down $0.44)

FTNT December 29 calls (FTNT141220C00029000, $0.95, down $0.10)

Entry Price: $0.95 (9/2/2014)

Exit Target: $1.90

Return: 0%

Stop Target: None


FTNT September 28 calls (FTNT140920C00028000, $0.15, flat)

Entry Price: $0.55 (6/30/2014)

Exit Target: $0.55 (Limit Order)

Return: -73%

Stop Target: None

Action: My near-term target for FTNT stock remains $28-$30, and a pop past $27 this week would be bullish. Support is holding at $26.

The September 28 calls expire in nine days, and I would like to get out of them for a scratch this week. There is a Limit Order to exit at 55 cents.


Rubicon (RBCN, $5.92, down $0.34)

RBCN December 8 calls (RBCN141220C00008000, $0.35, down $0.05)

Entry Price: $0.35 (8/25/2014)

Exit Target: $0.70

Return: 0%

Stop Target: None

Action: There is a gap to fill to $7, which is where the first level of resistance lies. A move above this level would be super bullish. Support is at $6 and a drop below this level would be bearish for the trade.


Yahoo (YHOO, $40.78, down $1.03)

YHOO October 43 calls (YHOO1018C00043000, $1.80, down $0.60)

Entry Price: $0.80 (8/11/2014)

Exit Target: $2.20+, raise to $3 (closed half at $1.60 on 9/8/14)

Return: 113%

Stop Target: $1.60 (Stop Limit)

Action: The calls traded to a low of $1.68, and the Stop Limit on the other half of the trade held on the drop to $40.60. The open interest on these calls is now over 130,000 contracts, and I mentioned that YHOO trades would become crowded as Wall Street came in late. This is why I closed half the trade into strength on Monday and why I opened the position in early August when the suit-and-ties were on vacation. Support for YHOO stock is at $40 and, if triggered, we will likely close the other half of the trade.


World Wrestling Federation (WWE, $14.62, down $0.28)

WWE September 15 calls (WWE140920C00015000, $0.20, down $0.10)

Entry Price: $0.50 (8/6/2014)

Exit Target: $1.00 (Limit Order)

Return: -60%

Stop Target: None

Action: The shorts are doing their best to keep the lid on at $15.

I have been talking about another round of short-covering coming on a close above $15. There is a gap to fill up to $17, and the 200-day moving average is at $17.44. Support is at $14. This trade is coming down to the wire.


CVS Caremark (CVS, $80.86, down $0.54)

CVS September 82.50 calls (CVS140920C00082500, $0.20, down $0.10)

Entry Price: $0.45 (7/28/2014)

Exit Target: $0.50 (Limit Order)

Return: -56%

Stop Target: None

Action: Shares continue to be volatile, as yesterday’s low checked-in a $80.57. Fresh support is at $80, and shares were back above $81 in after-hours trading last night. The break-even point is near $83, technically, as the entry price for the trade was 45 cents.


Trades on Hold— other 2014 Portfolio Open positions (3): These are trades that are still open in the portfolio but are down over 50%. They have longer expiration dates and are on “hold” but are not worth mentioning until they turn around. This means I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire.

S&P 500 Spiders September 180 puts (from August 2014) — continue to hold.

AKS Steel Holding October 12 calls (from August 2014) and January 13 calls (from August 2014) — continue to hold.

Pool October 50 puts (from July 2014) — The break-even point for the trade is at $48.90, technically, by mid-October. These options have nearly two months before they expire — continue to hold.


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