The bears won their second straight session on Tuesday to wrap up a victorious September as Wall Street braces for October.

The Dow dipped 28 points, or 0.2%, to close at 17,042. The blue-chips tested support at 17,000 after the bears pushed 17,017 on the open, but the bulls rebounded to reach 17,145. The rest of the session was choppy, with the bulls unable to hold 17,100. Resistance is at 17,200, with support at 17,000-16,800.

The S&P 500 slipped 5 points or 0.3%, to settle at 1,972. The index traded up to 1,985 and held 1,970 until the second half of trading before testing a low of 1,968. The pivot points I have talked about repeatedly at 1,985 and 1,970 were right on the money, and the drop below the latter was bearish, as it keeps 1,960-1,950 in play.

The Nasdaq fell a dozen points, or 0.3%, to end at 4,493. Tech tested support at 4,475 thirty minutes into the session after kissing 4,483 but rebounded to push 4,522 ahead of Wall Street’s lunch break. The bears are still eyeing a drop to 4,450-4,400, and the bulls are trying to clear 4,525 while holding 4,500-4,475. The close below 4,500 was the second of the month and the last four sessions. Again, watch the 4,475 level for clues of a pending breakdown or 4,525 for a breakout.

The Russell 2000 tanked 16 points, or 1.5%, to finish at 1,101. The small-caps opened in positive territory but quickly ran into trouble once again at 1,120 after the bulls stalled at 1,118. The bears pretty much controlled the rest of the session afterwards, with the index going out at its session low. This was a lower low than the previous week’s low of 1,107.51. Support at 1,100 has been holding but is shaky as a shack, as it appears it’s going to crack. Additional support is at 1,075.

The S&P Volatility Index ($VIX, 16.31, up 0.33) opened lower at 15.49 and traded down to 15.18 midday before reaching a peak of 16.43 during the second half of trading. There is risk to 17.50, with 20-22 possible on continued selling pressure. I mentioned the bulls had multiple layers of resistance to recover starting with 15 and then 13.50-12.50.

The history books were right about Tuesday’s action and, as a reminder, the chances of a bear streak continuing into today are high.

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From desk to press, futures look like this: Dow (-22); S&P 500 (-3.5); Nasdaq 100 (-11.5).

Momentum Options Play List

Closed Momentum Options Trades for 2014: 74-47 (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.

 

Walgreen (WAG, $59.27, down $0.33)

WAG October 10th expiration 56.50 weekly puts (WAG141010P00056500, $0.30, down $0.15)

Entry Price: $0.45 (9/29/2014)

Exit Target: $0.90 (Limit Order)

Return: -33%

Stop Target: None

Action: I have lowered the exit target to 90 cents for the entire trade. I would like to be out of the position by this Friday and see shares test $55 over the next few days.

 

General Motors (GM, $31.94, down $0.28)

GM December 32 puts (GM141220P00032000, $1.60, up $0.10)

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

Exit Target: $1.90, raise to $2.10 (Limit Order on half)

Return: 68%

Stop Target: $1.20 (Stop Limit)

Action: Shares traded to a low of $31.67 on Tuesday after peaking at $32.54 on the open. The puts traded to a high of $1.70. Let’s raise the limit order to exit half of the trade from $1.90 to $2.10 to see if we can squeeze a little more out of the trade on a drop below $31.50.

I believe GM could fall below $30 and test $28 in the longer term. 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.

 

Staples (SPLS, $12.10, down $0.05)

SPLS December 14 calls (SPLS141220C00014000, $0.20, down $0.05)

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

Exit Target: $0.70-$0.90

Return: -56%

Stop Target: None

Action: The next wave of support is at $12, and a break below this level would be bearish, with the 200-day moving average resting at $12.17. Resistance is at $12.40-$12.60.

I have a near-term target of $14 and a longer-term target of $17. The 52-week high is at $16.67.

Staples is turning the corner on a company turnaround and should be trading in the mid-teens by year-end. This is why I want to hang on to these options and why I used the December calls to give the trade plenty of time to play out.

The open interest in these call options is over 18,000 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. These options have three months before expiration, so we have plenty of time to ride out the short-term volatility.

 

Freeport-McMoRan (FCX, $32.65, up $0.25)

FCX November 36 calls (FCX141122C00036000, $0.20, up $0.05)

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

Exit Target: $1.05-$1.40

Return: -71%

Stop Target: None

Action: Resistance is at $34. There is risk to $32.50 on further selling pressure. These options have 51 days before they expire, and I like the trade as long as $32 holds up.

 

Flextronics (FLEX, $10.32, down $0.03)

FLEX October 12 calls (FLEX141018C00012000, $0.03, flat)

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

Exit Target: $0.15-$0.25

Return: -57%

Stop Target: None

 

FLEX January 11 calls (FLEX150117C00011000, $0.35, flat)

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

Exit Target: $1.50+

Return: -48%

Stop Target: None

Action: Support is at $10.25, and a close below this level would be bearish. Near-term resistance is at $10.75-$11.

I believe shares are going to make a strong move past $12 in the coming weeks and $14 by year-end.

 

Fortinet (FTNT, $25.26, down $0.28)

FTNT December 29 calls (FTNT141220C00029000, $0.65, flat)

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

Exit Target: $1.90

Return: -32%

Stop Target: None

Action: Resistance is at $25.50 and the 50-day moving average. A close above this level should lead to $26, which is where the fun begins again. There is risk to $24.50-$24 on a close below $25.

 

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. Click on the Open Trades and Closed Trades pages to see all open and closed positions.

AKS Steel Holding 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 less than three weeks before they expire. Earnings are due out on Oct. 16 and will ultimately decide the fate of this trade, as the options expire two days afterwards — Continue to hold.

Rubicon December 8 calls (from August) — Short interest is 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. Earnings are due out late October — Continue to hold.