MomentumOptions.com Pre-Market Update for 7/17/2017
Dow, S&P Trigger Fresh All-Time Highs
The bulls wrapped up a strong week following Friday’s second half breakout to fresh all-time highs and prior resistance levels from early June. The Financial sector lagged on mixed earnings results while the Transports continued their run to record highs. The beginnings of a summer rally appears to be in play but will be tested as 2Q earnings season starts to heat up.
The Dow rallied 84 points, or 0.4%, to close at 21,637 on Friday. The blue-chips were slightly weak on the open after falling a little over 20 points to 21,532. Rising support at 21,400-21,350 held with backup help now at 21,200-21,150 and the 50-day moving average. Upper resistance at 21,500-21,600 was finally cleared on the run to a record high of 21,681. Continued closes above the latter keeps blue-sky territory open 21,800-22,000.
The S&P 500 gained 11 points, or 0.5%, to settle at 2,459. The index slipped 3 points to 2,446 at the start of trading with fresh support at 2,440-2,435 holding. There is additional help at 2,425-2,420 and the 50-day moving average on a move below the latter. The surge to 2,463 and lifetime high and move above 2,450 gets fresh resistance at 2,475-2,500 in play.
The Nasdaq jumped 38 points, or 0.6%, to end at 6,312. Tech held positive territory throughout the session after opening at 6,289. The close at the session high into the closing bell cleared lower resistance at 6,300-6,350. The all-time high is at 6,341. A move above 6,340-6,350 could lead to a continued run to 6,400-6,450. Support is trying to move up to 6,250-6,225 with backup at 6,200-6,175 and the 50-day moving average.
The Russell 2000 advanced 3 points, or 0.2%, to finish at 1,428. The small-caps backpedaled a point to 1,424 on the weak open with rising support at 1,420-1,415 holding. There is risk to 1,400-1,390 and the 50/100-day moving averages on a move below the latter. The push past 1,432 missed setting a fresh lifetime high by a point. Continued closes above 1,430-1,435 could lead to a short-term spurt to 1,450-1,460.
The S&P 500 Volatility Index ($VIX, 9.51, down 0.39) traded back above the 10 level after kissing 10.14 with key resistance at 10.50-10.75 and the 50-day moving average holding. A move above 11.25-11.50 would likely signal a short-term top. The late day dip to 9.50 nearly cleared support at 9.50. The move below the 52-week low of 9.37 could lead to 9.25-9.
Tech continued to show strength with the PowerShares QQQ ETF (QQQ) closing higher for the 6th-straight session. The higher highs and higher lows posted by the following last Wednesday’s breakout above the 50-day moving average. Friday’s high reached $142.30 with fresh resistance at $142.50-$143. A close above the latter gets all-time highs and a run towards $144-$145 in play. Rising support is at $141.50-$140.
The iShares PHLX Semiconductor ETF (SOXX) made a run towards fresh resistance at $149.50-$150 on Friday high of $149.16. Last week’s move above the 50-day moving average was also a bullish signal with the index still trying to recover the train wreck on the drop from $155 in early June to $142.50 to end the month. Current support is at $148-$147.50.
The 2-day debacle from early June in the SOXX also led Tech lower over the same time period as you will notice in the aforementioned QQQ chart. Continued closes above the $150 level is imperative this week and here’s why the the current setup is important.
The chip sector is made up of more speculative stocks than the broader QQQ’s and lead the Tech stocks higher again on Friday. If the semiconductor sector can maintain momentum and clear the $150 level, it should also lead the QQQ’S and the Nasdaq in their attempts to breakout to fresh all-time highs. If so, look for the SOXX to make a push towards $152.50-$155 in the coming weeks.
The Spiders S&P 500 (SPY) gained 0.5% on Friday to settle at $245.56. SPY slipped 8 cents to $244.31 at the start of trading with rising support at $245-$244.50 holding. There is additional help at $242.50 followed by $241 and the 50-day moving average. The surge to nearly $296 afterwards and all-time high gets fresh resistance at $247.50-$250 in play.
The percentage of S&P 500 stocks trading above their 50-day moving average jumped nearly 10% on Friday and is now at 69.50. Continued closes above the 70 level could lead to 74-74.50 and the early June highs. The June 14th peak reached 74.25 followed by a run to 73.80 five days later. While this could signal a short-term market peak, if tested, it is important to remember January’s high cleared 82. Continued closes above the June highs could get 78-80 in the mix at some point this month, or next.
While I have talked about the possibility of a summer rally, one won’t be confirmed until the Nasdaq and Russell 2000 break out to fresh all-time highs. The sector rotation on the June market pullback hurt a number of sectors but it’s important there is a broad based rally on the breakout to higher highs.
I’ve talked about the possibility of a summer rally last through July and a lot of the current momentum will depend on 2Q earnings and possibly political rhetoric on healthcare and taxes. There hasn’t been a 5% correction in the S&P 500 in over a year but I’m cautiously planning for one at some point in August or September. However, if earnings come in light and expectations are lowered, along with a continued stalemate in D.C., the bears could awaken sooner.
From desk to press, futures look like this: Dow (+7); S&P 500 (+1); Nasdaq 100 (+8).
Momentum Options Play List
Closed Momentum Options Trades for 2017: 39-15 (74%). 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.
Cypress Semiconductor (CY, $14.47, up $0.16)
CY August 15 calls (CY170818C00015000, $0.60, up $0.05)
Entry Price: $0.40 (7/12/2017)
Exit Target: $0.80
Stop Target: None
Action: Lower resistance at $14.50-$14.75 held with Friday’s high tapping $14.49. The 52-week peak is at $14.98. Support is at $14.25-$14. Earnings are due out July 27th.
Wendy’s (WEN, $15.64, flat)
WEN August 16 calls (WEN170818C00016000, $0.45, flat)
Entry Price: $0.45 (7/12/2017)
Exit Target: $0.90
Stop Target: None
Action: Resistance is at $15.75-$16. Friday’s high reached $15.74. Support is at $15.50-$15.25.
Bank of America (BAC, $24.21, down $0.41)
BAC August 25 calls (BAC170818C00025000, $0.35, down $0.20)
Entry Price: $0.75 (7/3/2017)
Exit Target: $1.50
Stop Target: None
Action: Support is at $24-$23.75 following Friday’s drop to $23.82. Resistance is at $24.50-$24.75. Earnings are due out Tuesday. The 50/100-day moving averages held but are showing signs of rolling over. An earnings beat and a raised outlook could relieve the current pressure on the stock. However, if shares fall below $23.50 we could be forced to cut the cord on this trade.
AT&T (T, $36.30, up $0.09)
T August 37 puts (T170818P00037000, $1.15, down $0.05)
Entry Price: $0.78 (6/29/2017)
Exit Target: $1.60
Stop Target: $1.05 (Stop Limit)
Action: Shares traded up to $36.38 with lower resistance at $36.50-$36.75 holding. A move above these levels will likely trigger the Stop Limit. Support is at $36.
TherapeuticsMD (TXMD, $5.63, up $0.06)
TXMD August 7.50 calls (TXMD170818C00007500, $0.45, flat)
Entry Price: $0.50 (6/22/2017)
Exit Target: $1.00
Stop Target: None
Action: Resistance is at $5.75 and the 200-day moving average. A move above this levels should get $6-$6.25. Support is at $5.25-$5. Volume has been heavy over the past few weeks and shares are showing signs of a possible breakout.
iPath S&P 500 VIX Futures (VXX, 12.02, down 0.21)
VXX August 14 calls (VXX170818C00014000, $0.40, down $0.10)
Entry Price: $1.20 (6/15/2017)
Exit Target: $2.40
Stop Target: None
Action: Fresh support is at 12-11.75 with Friday’s bottom reaching a 52-week low of 11.93. Resistance is at 12.25-12.50.