MomentumOptions.com Pre-Market Update for 8/28/2017
Bulls End Weekly Skids
The market closed higher on Friday, halting weekly skids as European Central Bank (ECB) President Mario Draghi and Federal Reserve Chair, Janet Yellen, spoke about the economy. Yellen said the economy was stabilizing but made no specific remarks about monetary policy during her speech. Draghi said recoveries taking place in global economies are firming with Europe and Japan in earlier stages than other countries.
The Dow and S&P 500 snapped two-week losing skids while the Nasdaq and Russell 2000 ended four-straight weeks of losses. All sectors finished in the green on Friday, excluding Tech, which finished slightly lower.
The Dow gained 30 points, or 0.1%, to end at 21,813 on Friday. The blue-chips held positive territory throughout the session while reaching a peak of 21,906. Lower resistance at 21,900-22,000 held with a move above the latter a slightly bullish development. Support is trying to hold at 21,800-21,750 with backup help at 21,600-21,550 on a move below the 50-day moving average.
The S&P 500 added 4 points, or 0.2%, to settle at 2,443. The index tested a high of nearly 2,454 shortly after the open with resistance at 2,455-2,460 and the 50-day moving average holding for the fourth-straight session. Support remains at 2,340-2,335 with risk to 2,425-2,415 on a move below the latter.
The Nasdaq slipped 5 points, or 0.1%, to end at 6,265. Tech cleared lower resistance at 6,300-6,350 at the start of trading but a level that failed to hold. The choppiness afterwards led to a low of 6,257 with upper support at 6,250-6,200 standing tall. A move below 6,175 would be a bearish development.
The Russell 2000 climbed 3 points, or 0.3%, to close at 1,376. The small-caps showed a little weakness after the open but the quarter-point pullback easily held support at 1,360-1,355. Lower resistance at 1,380-1,385 and the 200-day moving average held on the session high with a close above the latter being a slightly bullish signal.
The S&P 500 Volatility Index ($VIX, 11.28, down 0.95) traded up to 12.45 intraday with lower resistance at 12.50-13.50 holding. The late day low reached 11.10 with upper support at 11-10.50 holding into the closing bell.
With just 4 trading days left in the month, the bulls and bears are still battling to determine which side gets the win for August. I often mention the bulls love taking the stairs to higher highs while the bears enjoy the elevator rides to lower lows. August is historically volatile and the action we have seen shouldn’t be much of a surprise with volume light and traders away on vacations ahead of the back-to-school season.
The whipsaw action is a good reminder on why I like to trade light during these time periods and also during trading ranges. Both can cause headaches to your portfolio if you aren’t careful and you ignore the trading signals. One of the best indicators this month was the action in the VIX and why it slightly irks me when the knuckleheads on TV say the VIX is broken or is a non-issue.
As far as the Fed, Janet Yellen’s prepared remarks on Friday included few comments on policy, saying only that substantial progress has been made on maximum employment and price stability. She fully defended regulatory reforms but worried about risks of excessive optimism and leverage. She added market-based measure may not reflect true risks, and mentioned the mid-2000’s certainly did not, to suggest the observed improvements should not be overemphasized. Yellen seemed hopeful that if the lessons, albeit painful, of the past are kept in mind, that the financial system and the economy would experience fewer crises and recover from any futures crisis more quickly.
ECB President, Mario Draghi’s said the global recovery is improving and firming up, but warned about demographic challenges to growth. He said the cyclical recovery we are now seeing globally will ultimately converge downwards to those slower growth rates. This would make it harder to work through the debt and demographic challenges facing many advanced economies, he added. Draghi also said significant monetary accommodation is still needed and that inflation is not yet converging to the central bank’s target.
With 2Q earnings season winding down, the bulk of large-cap stocks reporting reporting is down to only 9 S&P 500 index members. However, there is a number of small-cap S&P 600 index companies yet to report results with 131 on deck in the coming weeks.
There are 67 companies reporting results this week, including 7 S&P 500 members and 17 S&P 600 members. The earnings focus lately has been on the Retail sector where only 3 companies in the S&P 500 are still to report results. Total Q2 earnings for the Retail sector in the S&P 500 index are up 0.3% from the same period last year on 4.6% higher revenues, with 76% beating EPS estimates and 81% beating revenue estimates.
Total earnings for the 491 S&P 500 companies that have reported are up 11.2% from the same period last year on 5.6% higher revenues, with 74% beating EPS estimates and 68% topping revenue estimates. At the start of the quarter, the expectation was for earnings growth of 7.9%, which came down as the quarter unfolded, reaching as low as 5.6% just ahead of the start of the reporting season.
The Q2 earnings growth tally is on track to reach a new all-time quarterly record, surpassing the 2016 Q4 level.
The Spider S&P 600 Small-Cap ETF (SLY) shows May support at $118 getting stretched the prior Friday and last Monday following intraday lows of $117.39 and $117.23, respectively. The closing prices for both sessions were at $117.82 and $117.86. Another move below $117.50-$117.25 would be a bearish development. Friday’s close back above $119 gets fresh resistance at $120-$120.50 and the 200-day moving average in play. The index is coming off oversold RSI levels near 30 and is back in a slight uptrend that could lead to 50 on continued strength.
Momentum Options Play List
Closed Momentum Options Trades for 2017: 44-19 (70%). 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, $13.10, down $0.03)
FOLD October 15 calls (FOLD171020C00015000, $1.05, down $0.05)
Entry Price: $1.05 (8/25/2017)
Exit Target: $2.10
Stop Target: None
Action: Rising support is at $12.75-$12.50 followed by $12 and the 50-day moving average. Resistance is at $13.25-$13.50. Shares have been in a tight range between $12-$14 since early July aside from the stretch to $11.50.
This has been one of my favorite stocks this year and I’m still expecting a breakout and run to $20+ over the next 3-6 months.
TherapeuticsMD (TXMD, $5.93, down $0.19)
TXMD December 7.50 calls (TXMD171215C00007500, $0.65, down $0.05)
Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Stop Target: None
Action: Support is at $6-$5.75 with Friday’s low reaching $5.91. Resistance is at $6-$6.25. A golden cross is in the process of forming with the 50-day moving average on track to clear the 200-day moving average. This is typically a bullish development.
Intel (INTC, $34.67, down $0.04)
INTC October 37 calls (INTC171020C00037000, $0.16, down $0.02)
Entry Price: $0.53 (8/15/2017)
Exit Target: $1.10
Stop Target: 10 cents (Stop Limit)
Action: Set a Stop Limit at 10 cents.
Support is at $34.50-$34.25 with a move below the former likely signaling an early exit for the position. Resistance is at $34.75-$35.
TiVo (TIVO, $17.95, down $0.10)
TIVO October 20 calls (TIVO171020C00020000, $0.35, down $0.05)
Entry Price: $0.70 (8/8/2017)
Exit Target: $1.40
Stop Target: None
Action: Support is at $18-$17.75. Resistance is at $18.50.