Pre-Market Update for 9/11/2017

Technical Outlook Still Slightly Bullish

8:00am (EST)

The market was mixed on Friday after trading in a narrow range with the Dow and Russell 2000 closing slightly higher. The Nasdaq showed more weakness than the S&P 500 with all of the major indexes closing the week lower. The 1% pullback, on average, ended a two-week market rally but the technical damage was mostly limited. Excluding the Russell 2000, the major indexes held their 50-day moving averages that are still in rising uptrends.

The Financial sector showed the most strength on Friday, rising 0.9%, with XLF holding its 200-day moving average for the second-straight session. Utilities, Healthcare, and the Industrial sectors also showed strength. Energy led the laggards, with XLE falling over 1%.

The Dow added 13 points, or 0.1%, to closed at 21,797 on Friday. The blue-chips opened lower at 21,764 while trading down to 21,731 shortly afterwards. Lower support at 21,775-21,750 and the 50-day moving average held with continued risk to 21,600-21,550 on a close below the latter. Resistance at 21,900-22,000 continues to be a brick wall with 21,846 holding on the intraday high.

The S&P 500 declined 3 points, or 0.2%, to end at 2,461. The index tested a bottom of 2,459 on the open with upper support at 2,460-2,450 and the 50-day moving average holding. Backup help is at 2,435-2,430 and the 100-day moving average on a move below the latter. Resistance at 2,475-2,480 held on the 2-point pop to 2,467 with lower highs over the past four sessions. This is a slightly bearish signal.

The Nasdaq fell 37 points, or 0.6%, to settle at 6,360. Tech traded in negative territory throughout the session with the low tapping 6,354. Near-term support at 6,350-6,325 held for the third time in four sessions with a move below 6,300 and the 50-day moving average with a close below the latter being a bearish development. Lowered resistance is at 6,400-6,425.

The Russell 2000 climbed three-quarters of a point, or 0.1%, to finish at 1,399. The small-caps kissed 1,394 during the morning action with support at 1,395-1,390 holding. A move below 1,385 and and the 200-day moving average would be a bearish signal. Resistance at 1,400-1,405 and the 100/50-day moving averages.

The S&P 500 Volatility Index ($VIX, 12.12, up 0.57) stayed elevated while trading to a peak of 12.60 ahead of Friday’s closing bell with lower resistance at 12.50-13.50 holding. Support is at 11.50-11 and the major moving averages.

The numbers for Q2 earnings season are just about complete with less than a handful of major companies left to go before it’s official. So far, total earnings for the quarter are up 11.6% on 6.1% higher revenues. This marks the second quarter in a row of double-digit earnings growth for the S&P 500 index but was down from earnings being up 13.5% in Q1.

Estimates for Q3 have come down since the quarter got underway, but the magnitude of negative revisions nevertheless compares favorably to other recent periods. Simply put, Q3 estimates have come down, but the extent of the decline has been modest relative to other recent comparable periods.

Total Q3 earnings for the S&P 500 index are expected to be up over 4% from the same period last year on 5%-6% higher revenues. For full-year 2017, total earnings for the S&P 500 index are expected to be up 8% on 5% higher revenues. Looking further out, index earnings are expected to be up 11% in 2018 and nearly 9% in 2019.

In Fed news, NY Fed Bill Dudley said was surprised by the drop in inflation, but expected the bond portfolio run-off to begin as expected. He advocated further gradual rate hikes, though he made no mention of another one this year.

As far as Irma, Dudley said historically the short-term impact of hurricanes are negative but over the longer-term they add to economic activity. On changes in the FOMC members, he noted that though people change, the Fed has a mandate, which isn’t changing. He also said it is a Committee which makes policy decisions, not just one or two people.

The VelocityShares Daily Inverse VIX (ZIV) pulled back below support at 70.50-70 following a low of 69.36. The close below 69.50 was slightly bearish for the market with risk to 68 and longer-term support. This level held in early August and at the beginning of July and has been serving as longer-term support since June. Continued closes below 68-67.50 would be a major development. RSI is in a nasty downtrend and could be headed towards 30 on continued weakness.

Gold traded to a 52-week high of $1,362.40 an ounce on Friday and has been in a strong uptrend following the triple-top breakout above the $1,300 level in late August. Current momentum and a rush to safety could carry Gold towards $1,375-$1,400 and longer-term resistance. A base of support has formed in the $1,340-$1,335 area and will try to hold on a pullback.

The Spider Gold Shares (GLD) is in a similar pattern after clearing a triple-top breakout above $123 in late August. Current resistance is at $128-$128.50 with the recent 52-week high at $128.32. A run towards $130-$132 could be in the cards on continued closes above $128.75-$129. Rising support is at $127-$126.75.

Airline stocks have been weak of late with US Global Jets (JETS) being the only pure-play airline ETF at the moment. It’s a relatively new fund with an inception date of April 30, 2015 that invests primarily in domestic airline companies. Near-term support is at $28-$27.75 and represents the mid-April breakout above these levels. A move below the latter could lead to further weakness to $27.50-$27. Resistance is at $28.50-$28.75 followed by $29-$29.25 and the 200-day moving average. The 50-day moving average is on the verge of falling below the 100-day moving average to form a mini death-cross and is typically a bearish signal for further weakness.

The percentage of S&P 500 stocks trading above the 50-day moving average is currently at 53% with Friday’s range reaching a high of 55% and a low of 50%. These levels have been holding for six sessions but were stretched to 45% on the low side and 56% on the upside. A move above 57%-60% should lead to continued market strength while a move below 45% could lead signal additional selling pressure.

The mini trading range that has formed over the past week follows a breakout for a week to higher highs from a previous weekly trading pattern. While a continuation of this trading range could continue, there is a chance of another breakout to higher highs this week if the bulls get off to a good start today. A move below backup support levels would be a bearish development.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 46-19 (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.


Cypress Semiconductor (CY, $13.47, down $0.17)

CY October 14 calls (CY171020C00014000, $0.40, down $0.10)

Entry Price: $0.60 (9/1/2017)
Exit Target: $1.20
Return: -33%
Stop Target: None

Action: Lower support at $13.50-13.40 held on Friday’s low. The 50-day moving average is rolling over suggesting further risk to $13.25-$13.20. Resistance is at $13.70-$13.75 and the 100-day moving average.


TherapeuticsMD (TXMD, $6.61, down $0.30)

TXMD December 7.50 calls (TXMD171215C00007500, $0.90, down $0.05)

Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Return: -6%
Stop Target: None

Action: Upper support at $6.50-$6.25 held on Friday’s low. Resistance is at $6.75-$7.


Intel (INTC, $35.19, down $0.35)

INTC October 37 calls (INTC171020C00037000, $0.19, down $0.08)

Entry Price: $0.53 (8/15/2017)
Exit Target: $1.10
Return: -31%
Stop Target: 10 cents (Stop Limit)

Action: Support is at $35-$34.75 and the 50-day moving average with Friday’s low tapping $35.08. Resistance is at $35.25-$35.50 and the 100/200-day moving averages.


TiVo (TIVO, $18.10, up $0.50)

TIVO October 20 calls (TIVO171020C00020000, $0.40, up $0.05)

Entry Price: $0.70 (8/8/2017)
Exit Target: $1.40
Return: -43%
Stop Target: None

Action: Resistance is at $18.25-$18.50 and the 50/200-day moving averages. Support is at $18-$17.75.