Pre-Market Update for 6/19/2017

Building Out the Watch List

8:00am (EST)

The bears continued their assault on lower lows last week while splitting the scorecard with the bulls. Friday’s action was slightly timid on a mixed close despite heavy volume on June expiration. With the month half over, the battle will likely heat up and on lesser volume as this week is historically bearish.

The bulls could show up to dance but the recent weakness in the Tech sector bears caution. The month of June also ends the Nasdaq’s “Best Eight Months” according to the good book of almanacs. Economic news and political rhetoric will likely take center stage again this week as Wall Street awaits second-quarter earnings season.

The Dow added 24 points, or 0.1%, to end at 21,384 on Friday. The blue-chips were weak throughout the first half of trading with the low kissing 21,308. Support at 21,200-21,100 has held all month, or 12-straight sessions. A close below 21,000 could trigger lower lows. The index came within 8 points of another all-time high after going out at it high with resistance at 21,450-21,500 still in play.

The S&P 500 gained less than a point, or 0.03%, to finish at 2,433. The index was held underwater until the final minutes of action with the bears pushing 2,422 intraday. Support at 2,425-2,420 has also held throughout June with 2,410-2,400 and the 50-day moving average serving backup. Resistance at 2,440-2,450 easily held with 2,433 holding for the second-straight session.

The Nasdaq gave back 13 points, or 0.2%, to close at 6,151. Tech traded in negative territory all day with upper support at 6,125-6,100 holding on a dime. I continue to talk about crucial support at 6,100 and a level that has not been breached in a month, or May 22nd, technically. I could use the QQQ’s if 6,100 and the 50-day moving average crack this week. Resistance remains at 6,175-6,200 with a move above the latter a slightly bullish signal.

The Russell 2000 slipped 3 points, or 0.2%, to settle at 1,407. The small-caps followed Tech and bleed red throughout Friday with the morning low kissing 1,399. This was a major warning sign on the point stretch below lower support at 1,410-1,400. I specifically mentioned there is wiggle room to 1,395 on a move below 1,400 and why I didn’t open a bearish IWM trade on Friday. I have highlighted risk to 1,375-1,370, if 1,395 cracks but the 50/100-day moving averages could soften the blow. Lowered resistance is now at 1,410-1,415 followed by 1,420-1,425.

The S&P 500 Volatility Index ($VIX, 10.38, down 0.52) tapped a high of 11.35 shortly after the open with lower resistance at 11.50-12.50 and the 50/100-day moving averages holding. A move above 12.75 and the 200-day moving average likely confirms continued weakness in the market this week. The move back below lower support at 10.50-10 was mildly bullish on the split to 10.26 into the closing bell.

The Dow closed May at 21,008 and is up 276 points for the month while the S&P 500 came in at 2,411 and is up double-deuces. Both indexes were up last week by 113 and 2 points, respectively.

The Nasdaq was at 6,198 to start June and fell 56 points last week and the Russell 2000 dropped 15 points while entering the month at 1,370. Tech is down 47 points for June with the small-caps showing a gain of 36 points. The suit-snd-ties can call this month and blame pullbacks on sector rotation, diversification, and asset allocation. I will just label the action choppy and I have been preparing us for it.

I have highlighted the 12-straight sessions that support at 21,200-21,100 has held on the Dow. Obviously, the easiest read is to short the index once 21,100 cracks. The real test of a bearish trade will be if the blue-chips hold 21,000. I often talk about stretch and while there is a good chance to make some money to the downside, it won’t be confirmed big money until 20,800, or lower comes into play.

The best way to play the Dow is by using the Spiders Dow Jones Industrial Average ETF (DIA). While I often mention there are weekly and monthly options available to trade, I like to use the monthly because the bid/ask is usually under a nickel.

For a bearish trade, the chart is basically the same setup as the Dow with a target at $211.50-$211 to possibly go short. With my Dow blue-sky targets currently set at 21,450-21,500, resistance for DIA is at $214.50-$215.

The DIA July 211 puts (DIA170721P00211000, $1.45, down $0.10) can be used with an initial exit at $208 and below. If DIA trades below $208.10, technically, by July 21st, these put options will double from current levels for a 100% return.

I didn’t list DIA call options to target as I feel $208 will come into play before $216 and the momentum the stock will need to possibly double our money.

I trade the PowerShares QQQ Trust (QQQ) more often than DIA but I want to show how to trade the all the major indexes, as well. Tech will, or has become, the overcrowded trade so I want to be careful in not overpaying for the best options. I talked about the 6,050 level holding “big-time” on the early May pullback and an initial level that could come quickly if 6,100 fails to hold.

The QQQ chart shows current support at $137.50-$137 and the 50-day moving average. There is a good chance a further backtest to $133.25-$133 and the 100-day moving average comes into play on closes below $137. Resistance is at $138.75-$139.

The July QQQ QQQ July 135 puts (QQQ170721C00135000, $1.50, up $0.10) can be put on your Watch List as a possible bearish trade if our conditions are met.

The June 9th all-time record high on the Nasdaq is just north of 6,341 and came within 9 points of reaching my upper February target of 6,350 for the index.

From February 27th:

“The Nasdaq came into the year at 5,383 and is higher by 462 points, or 9%. While I have talked about the run to 6,000, a move towards 6,300-6,350 would add another 8%-9% from current levels and a total return of 17%-18% for the year.”

Of course, this was my year-end target and while I’m hoping I’m wrong and Nasdaq 7,000 comes into play this year, I’m certainly not skittish riding with the bears for a few weeks, or months, or for the rest of the year for that matter. It’s all about the trend, folks. I launched my newsletter in 2008 during one of the worst bear markets in history. My Track Record was 126-15 and is posted in the Members Area.

In any event, I don’t think a major selloff is in the cards but there could be a pause with some weakness until 2Q earnings season rolls around. Then, who knows, perhaps a summer rally follows.

I hope everyone had a great Father’s Day weekend and I’m a little light on commentary due to a little travel. I will have more thoughts to share throughout the week and I have added some spiffy charts on FOLD for you to check out.

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 2017: 37-15 (71%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records.

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 8am and 12pm–2pm (EST) updates. Also, I will usually give you a heads-up if I think I’m going to send a Trade Alert outside of these time frames.


Amicus Therapeutics (FOLD, $9.43, up $0.64)

FOLD July 9 calls (FOLD170721C00009000, $0.90, up $0.35)

Entry Price: $0.50 (6/15/2017)
Exit Target: $1.00-$1.50
Return: 80%
Stop Target: 55 cents (Stop Limit)

Action: Set an initial Stop Limit at 55 cents to start protecting profits.

Shares traded to a high of $9.48 on Friday with the options peaking at 92 cents. Fresh resistance is at $9.50-$10. Rising support is at $9-$8.75. The 52-week peak is at $9.61. I have also included Talking Points with the two charts below.

3-year chart

iPath S&P 500 VIX Futures (VXX, 12.99, down 0.10)

VXX August 14 calls (VXX170818C00014000, $1.05, down 0.10)

Entry Price: $1.20 (6/15/2017)
Exit Target: $2.40
Return: -12%
Stop Target: None

Action: A bottoming process is trying to form at the 13 level support at 13-12.75. The recent and 52-week low is at 12.85. Resistance is at 13.25-13.50.