The bears continued their assault on the market following Friday’s opening peak to fresh all-time highs and delivered a nasty bite to the small-caps in the process. The “death cross” that has been developing since August finally triggered on the small-caps’ tumble below key support on Monday, suggesting there could be further weakness over the near term.

The Dow dropped 107 points, or 0.6%, to end at 17,172. The blue-chips traded in negative territory throughout the session and traded to a low of 17,159. Support is at 17,000-16,800 with resistance at 17,350.

The S&P 500 fell 16 points, or 0.8%, to settle at 1,994. The index fell below the 2,000 level an hour after the open and kissed a low of 1,991. The bears are still gunning for 1,975 and might get there this week if the bulls can’t hold 1,985. A close back above 2,000 keeps higher highs to 2,025 intact.

The Nasdaq tanked 52 points, or 1.1%, to close at 4,527. Tech gave up the 4,550 level 45 minutes into trading and traded down to 4,513 intraday. The bulls held support at 4,500, but there is risk to 4,400 on a continued pullback. Resistance is at 4,550-4,575.

The Russell 2000 got spanked for 17 points, or 1.5%, to finish at 1,129. The small-caps faded below 1,140 within minutes of the opening bell and bottomed at 1,127 around noon. The bulls held 1,125 and the first wave of support I highlighted, but there is risk to 1,100 and the second wave of support on a close below this level. Obviously, the 1,140 level will now serve as resistance going forward followed by 1,150.

The S&P 500 Volatility Index ($VIX, 13.69, up 1.58) surged 13% after reaching a peak of 13.98. The bears easily cleared 12.50 (now resistance for the bulls) after the open at 13.14 and held 13.50. This reopened the door for a test to 15, and any pops above this level could lead to 17.50-20.

I opened a few new put positions on Monday and have included the two-year charts on the stocks to show you why I went short.

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From desk to press, futures look like this: Dow (-46); S&P 500 (-6.5); Nasdaq 100 (-15).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 72-46 (61%). 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.

All prices given in this update are current as of 9:00 a.m. EST.

Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the Open Trades and Closed Trades.

 

General Motors (GM, $33.44, down $0.50)

GM December 32 puts (GM141220P00032000, $0.85, up $0.10)

Entry Price: $0.95 (9/22/2014)

Exit Target: $1.90

Return: -11%

Stop Target: None

Action: Shares appear ready to trade down to $32.50 over the near-term. I believe shares could fall below $30 and test $28 in the longer term. The two-year weekly chart shows a close below $33 could lead to $31-$30. The 200-weekly average is at $29. If shares trade down to $30 by mid-December, these options will easily double from the entry price, as they will be worth at least $2.

sc1

Apollo Group (APOL, $25.70, down $0.38)

APOL November 24 puts (APOL141122P00024000, $0.85, up $0.05)

Entry Price: $0.85 (9/22/2014)

Exit Target: $1.70

Return: 0%

Stop Target: None

Action: I have a near-term target of $24, with a chance of shares testing $22-$20. I have been bearish on this stock for years and have been targeting a test to the mid-teens at some point. As you can see from the two-year weekly chart below, $24 is the last line of support and represents the 100-week moving average. There is risk to $28 on a back test, but I wanted to get in on yesterday’s drop below $26.

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Staples (SPLS, $12.83, down $0.23)

SPLS December 14 calls (SPLS141220C00014000, $0.30, down $0.15)

Entry Price: $0.45 (9/18/2014)

Exit Target: $0.70-$0.90

Return: -33%

Stop Target: None

Action: A close above $13.20 would be bullish. I have a near-term target of $14 and a longer-term target of $17. The 52-week high is at $16.67. The open interest in these call options is over 17,000 contracts and continues to build. The 50-day moving average (MA) recently crossed over the 100-day MA and shares are in a nice uptrend. Support is at $12.60-$12.40 and the 200-day MA. These options have three months before expiration, so we have plenty of time to ride out the short-term volatility.

 

Freeport-McMoRan (FCX, $33.17, down $0.89)

FCX November 36 calls (FCX141122C00036000, $0.30, down $0.10)

Entry Price: $0.70 (9/16/2014)

Exit Target: $1.05-$1.40

Return: -57%

Stop Target: None

Action: There is risk to $32.50 on further selling pressure. I still want to keep a few call options open into November, and that’s why I didn’t cut the cord on these options. They may get cheaper, but I’m looking for support to hold. These options have two months before they expire, and I like the trade as long as $32 holds up.

 

Flextronics (FLEX, $10.68, down $0.17)

FLEX October 12 calls (FLEX141018C00012000, $0.05, flat)

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

Exit Target: $0.15-$0.25

Return: -29%

Stop Target: None

 

FLEX January 11 calls (FLEX150117C00011000, $0.50, down $0.05)

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

Exit Target: $1.50+

Return: -28%

Stop Target: None

Action: Support is at $10.75-$10.50. Near-term resistance is at $11.25. If cleared, shares could make another run at $11.75 and fresh 52-week peaks. I believe shares are going to make a strong move past $12 in the coming weeks and $14 by year-end.

 

Fortinet (FTNT, $26.08, down $0.34)

FTNT December 29 calls (FTNT141220C00029000, $0.85, down $0.10)

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

Exit Target: $1.90

Return: -11%

Stop Target: None

Action: Support is at $26, with backup at $25.50 and the 50-day moving average. A close above $27 would be bullish.

 

Rubicon (RBCN, $4.97, down $0.04)

RBCN December 8 calls (RBCN141220C00008000, $0.10, down $0.05)

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

Exit Target: $0.70

Return: -71%

Stop Target: None

Action: There is risk to $4.75-$4.50. Resistance is at $5.25.

I still like the trade, as open interest is massive in these call options. The short-interest is also ballooning, with 30% of the float sold short. Analysts are expecting a terrible quarter, but the company has beaten loss estimates two of the past four quarters.

This is a sapphire play that has until December before the trade expires. These were “cheap” options, so stay patient, as a big payday, or buyout of the company, could be coming.

 

Trades on Hold — other 2014 Portfolio Open positions (2): 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. Click on the Open Trades and Closed Trades pages to see all open and closed positions.

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 a month before they expire — Continue to hold.