Pre-Market Update for 12/29/2016

Volatility Rises on Light Volume

8:00am (EST)

The market pulled back on Wednesday after starting the session higher. The backtest to fresh support wasn’t too harmful and something I expected last week. However, the next few days need to be watched carefully as continued weakness could be a cause for concern heading into 2017.

The Dow fell 111 points, or 0.6%, to settle at 19,833. The blue-chips made a run to 19,981 but fell shy of its all-time high by a six-pack. The close below lower resistance at 20,000-19,900 was a slightly negative development. Support at 19,800 held following the low of 19,827 with backup help at 19,600-19,500.

The S&P 500 stumbled 19 points, or 0.8%, to close just below 2,250. The index also failed its lifetime high by a half-dozen points after stalling at 2,271 and lower resistance at 2,275-2,300. The fade to 2,249 nearly held lower support at 2,260-2,250 but the close below the latter gets 2,240-2,235 in the mix.

The Nasdaq fell 49 points, or 0.9%, to end at 5,438. Tech tested upper resistance at 5,475-5,500 but couldn’t quite clear the latter after peaking at nearly 5,499. I mentioned rising support is at 5,450-5,425 and yesterday’s low tapped 5,434. A close below 5,400 could be an opportunity to go short for a few days, or weeks, so stay ready.

The Russell 2000 tumbled 16 points, or 1.2%, to finish at 1,360. The small-caps peaked at 1,379 on the open with lower resistance at 1,375-1,400 holding. Upper support at 1,360-1,350 held following a low of 1,359 into the final minutes of trading. There is risk to 1,340-1,335 on a move below the latter.

The S&P 500 Volatility Index ($VIX, 12.95, up 0.96) kissed 11.85 at the start of trading with short-term support at 11.50 holding. Longer-term support remains at 10.50-10 but might not tripped this year. The close above lower resistance at 12.50-13.50 was a slightly bearish signal following the day’s high of 13.04.

If the bears crack additional layers of support crack AND the VIX trips 13.50, be ready to add a few short positions to the portfolio.

From desk to press, futures look like this: Dow (xx); S&P 500 (xx); Nasdaq 100 (xx); Russell (xx).

Momentum Options Play List

Closed Momentum Options Trades for 2016: 87-37 (70%). 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.
Sony (SNE, 28.28, down $0.10)

January 27.50 puts (SNE170120P00027500, $0.35, down $0.05)

Entry Price: $0.30 (12/23/2016)
Exit Target: $0.60
Return: 17%
Stop Target: None

February 27 puts (SNE170217P00027000, $0.65, flat)

Entry Price: $0.65 (12/23/2016)
Exit Target: $1.30
Return: 0%
Stop Target: None

Action: Shares closed a penny off the session low yesterday. Support is at $28.25-$28. Resistance is at $28.75-$29.
Array Biopharma (ARRY, $8.65, down $0.14)

ARRY March 10 calls (ARRY170317C00010000, $0.90, down $0.05)

Entry Price: $0.85 (12/21/2016)
Exit Target: $1.70
Return: 6%
Stop Target: None

Action: Yesterday’s low reached $8.63. Support at $8.50-$8.25. Resistance is at $8.75-$9.
CVS Health (CVS, $79.04, down $0.25)

CVS January 82.50 calls (CVS170120C00082500, $0.35, down $0.10)

Entry Price: $0.68 (12/20/2016)
Exit Target: $1.40
Return: -49%
Stop Target: None

Action: Yesterday’s bottom reached $78.64. Support is at $78.50-$78. Resistance is at $80-$80.50 and the 50-day moving average.
Viavi Solutions (VIAV, $8.25, down $0.16)

VIAV March 9 calls (VIAV170317C00009000, $0.24, down $0.04)

Entry Price: $0.37 (12/8/2016)
Exit Target: $1.00
Return: -35%
Stop Target: None

Action: Support is at $8.25-$8. Resistance is at $8.50-$8.60.