Pre-Market Update for 4/13/2017

Dow/ S&P 500 Fall Below 50-day MA’s

8:00am (EST)

The selling pressure continued on Wednesday ahead of this morning’s earnings parade from the financial sector along with heightened geopolitical concerns. The bears failed to make fresh lows for the week but are in control to get the weekly win.

The Dow declined 59 points, or 0.3%, to finish at 20,591. The blue-chips traded in negative territory throughout the session with the low reaching 20,553. Lower support at 20,600-20,550 held once again and for the 12th-straight close. Resistance remains at 20,750-20,800.

The S&P 500 fell 8 points, or 0.4%, to close just below 2,345. The index failed positive territory for the second-straight day with the bottom reaching 2,341. Support at 2,350-2,340 was split with a close below 2,335 a bearish development. Resistance is at 2,370-2,375 with a recovery of 2,360 today a possibly slightly bullish sign for next week.

The Nasdaq sank 30 points, or 0.5%, to settle at 5,836. Tech tested a high of 5,868 shortly after the open but the 2-point pop failed lower resistance at 5,875-5,900. The drop below 5,850 and low of 5,830 held upper support 5,825-5,800. A close below the latter would be a nasty development. The index is currently holding its 50-day moving average.

The Russell 2000 tanked 17 points, or 1.3%, to end at 1,359. The small-caps also held negative court throughout Thursday’s action with the bottom tapping 1,358. Upper support at 1,360-1,350 nearly held with wiggle room to 1,345 on continued weakness. A close below the latter gets 1,325-1,320 in play. Resistance is at 1,375-1,380.

The S&P 500 Volatility Index ($VIX, 15.77, up 0.70) stayed elevated for much of the session with the bears pushing a high of 16.16. Resistance is at 17-17.50 with risk to 20 if this area is breeched. Rising support is at 14-13.50.

The last trading day ahead of Good Friday is typically bullish as the Nasdaq has closed higher for 16-straight sessions ahead of Easter. However, a strong move will be needed to regain Wall Street’s confidence with the Dow and S&P 500 now below their 50-day moving averages. I often talk about stretch so let’s see how the session goes.

From desk to press, futures look like this: Dow (-1); S&P 500 (-1); Nasdaq 100 (+2).


Momentum Options Play List

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STMicroelectronics (STM, $14.70, down $0.36)

STM May 15 calls (STM170519C00015000, $0.65, down $0.20)

Entry Price: $1.15 (3/31/2017)
Exit Target: $2.30
Return: -43%
Stop Target: 55 cents

Action: Support is at $14.75-$14.50 was split with yesterday’s low reaching $14.67. Resistance is at $15. Some of the suppliers to Apple have seen their stock prices pull back in recent weeks as the company develops more components in house. I don’t believe the risk is as high for STM but the price action could force us out of the trade.


Viavi Solutions (VIAV, $9.48, down $0.35)

VIAV May 12 calls (VIAV170519C00012000, $0.05, down $0.05)

Entry Price: $0.29 (3/27/2017)
Exit Target: $0.60
Return: -83%
Stop Target: None

Action: The close below fresh support at $9.50 and low of $9.46 was a bearish development. Fresh support is at $9.25-$9. Resistance is at $9.75-$10. I want to take a closer look at the chart this morning and research patterns before possibly cutting the cord on this trade during the midday update.