MomentumOptions.com Pre-Market Update for 10/9/2017
Nasdaq Stays Hot/ Micro-Caps Holding Fresh Highs
The bulls took a breather on Friday as the major indexes closed mixed to finish the week. The Dow and S&P 500 traded lower for the first time in 7 and 10 sessions, respectively, while the Russell 2000 slipped for the second time in three sessions. Meanwhile, the Nasdaq is riding a 9-session winning streak with micro-caps in a holding pattern heading into the start of 3Q earnings season.
The Dow dipped over a point, or 0.1%, to end at 22,773. The blue-chips traded in negative territory throughout the session with the low reaching 22,730. Support at 22,600 easily held with risk to 22,400-22,350 on a move below the latter. Resistance is at 22,800-23,000 with the all-time high at 22,777 into the close.
The S&P 500 slid nearly 3 points, or 0.1%, to close at 2,549. The index also spent the entire session underwater with the bottom tapping 2,543. Rising support at 2,525-5,520 held with backup help at 2,510-2,500. Resistance remains at 2,550-2,560 with last week’s lifetime high reaching 2,552.
The Nasdaq climbed 5 points, or 0.1%, to settle at 6,590. Tech opened at its low of 6,566 with support at 6,525-6,500 holding. A move below the latter would likely signal a short-term top. The run to another record high into Friday’s closing bell keeps fresh fluff open to 6,650-6,700.
The Russell 2000 gave back 2 points, or 0.1%, to finish at 1,510. The small-caps were also weak throughout the session with the low touching 1,506. Upper support at 1,500-1,490 easily held with risk to 1,475-1,470 on a move below the latter. Resistance remains at 1,515-1,525 with the recent all-time a point below the former.
The S&P 500 Volatility Index ($VIX, 9.65, up 0.46) tested a low of 9.11 on the open with lower support at 9.50-9.25 holding. The 52-week low is at 8.84. Lower resistance at 10-10.50 was split on the intraday high of 10.27.
Materials and Financials were the strongest sectors for the week, rising 1.9%. The only sector laggards were Energy and Consumer Staples after giving back 0.6% and 0.3%, respectively.
The Consumer Staples Select Spiders (XLP) traded to a low of $53.74 with July support at $53.50 still in play on continued weakness. A close below $53.50 would likely lead to a continued backtest towards $52.50-$50. The 52-week low is at $49.98. Current resistance is at $54 and the 200-day moving average followed by $54.25. The 50-day moving average remains in a downtrend with RSI showing signs of continued weakness to the low 30’s.
The VelocityShares Daily Inverse VIX (ZIV) traded lower throughout the session while bottoming at 76.76. Upper support at 76.50-76 held with risk to 75-74.50 on a move below the latter. Resistance is at 77.50-77.75 with a close above the latter getting 78-80 in play. RSI is near the 70 level and an area that represented resistance throughout late July and into early August.
This index works opposite the VIX and moves higher when the market is up. I cover the VIX on a daily basis but I also like watching ZIV when the market is making fresh all-time highs.
The percentage of Nasdaq 100 stocks trading above the 50-day moving average is currently at 70% and has cleared the 69% level from the first of September. Continued closes above 70% would be bullish for possibly reaching 75%. The area held in April, May and July and could signal a short-term market top, if reached. A move back below 65% would signal upcoming market weakness.
The percentage of S&P 500 stocks trading above the 200-day moving average is currently near 73% with Thursday’s peak reaching nearly 75% and a 6-month peak. The one-year high reached 80%-82% at the beginning of the year. A move below 70% would be a signal for a possible pullback towards 65%.
iShares Micro-Cap ETF (IWC) has been in a holding pattern for four sessions following the September surge and breakout above $88 and the 50-day moving average. Friday’s high reached $96.50 but failed the recent all-time high of $96.71. Fresh resistance is at $96.75-$97.50 with a move above the latter likely leading to triple-digits. A close below $96-$95.75 could lead to a continued backtest towards $94.50-$94 to retrace the gap higher. RSI tapped 90 last week and is signaling overbought conditions at current levels.
These were my notes from February 27th, 2017:
“The Dow is up 1,059 points for 2017, or 5%. A move towards 22,000-22,250 would add 6%-7% from current levels and would give the blue-chips a total gain of 12%-13% for the year. The Dow came into the year at 19,762. The key levels of support are at 20,000-19,800 with a move below these levels a possible opportunity to go short, longer-term.
The S&P 500 has added 129 points YTD, or 6%. A run towards 2,500-2,525 would equal another move of 6%-7% from current levels and a total return of 12%-13% for 2017. The index started the year at 2,238. The key levels of support are at 2,300-2,275 with a move below these levels a possible opportunity to go short, longer-term.
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. The key levels of support are at 5,750-5,700 with a move below these levels a possible opportunity to go short, longer-term.
The Russell 2000 has gained 37 points, or 3%, for 2017 after coming in at 1,357. While I had already penciled-in Price Targets of 1,400-1,450 for the index, the upper end of this range represents another 4% move higher. I would like to believe the small-caps would outperform in a more business friendly, and less regulatory, environment that could lead towards a run towards 1,500-1,525. This would add another 8%-9% from current levels and an overall return of 11%-12% for 2017. The key levels of support are at 1,375-1,350 with a move below these levels a possible opportunity to go short, longer-term.” (end)
I don’t change my yearend price targets during the year and these levels have been cleared so it’s important to note. Of course, between now and until the end of December is nearly three months and a likely pullback will come at some point. With 3Q earnings coming out, it will be the catalyst that keeps higher highs in play, or a pending backtest if companies fail to meet expectations.
Momentum Options Play List
Closed Momentum Options Trades for 2017: 49-19 (72%). 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, $15.51, up $0.03)
CY November 16 calls (CY171117C00016000, $0.55, flat)
Entry Price: $0.45 (10/2/2017)
Exit Target: $0.90
Stop Target: None
Action: Lowered resistance at $15.50-$15.75 held on Friday’s 52-week intraday high of $15.63. Support is at $15.25-$15.
Limelight Networks (LLNW, $4.24, down $0.04)
LLNW December 4 calls (LLNW171215C00004000, $0.60, flat)
Entry Price: $0.37 (9/21/2017)
Exit Target: $0.80-$1.20
Stop Target: None
Action: Upper support at $4.25-$4.20 was breached following the backtest to $4.23. Resistance is at $4.50.
TherapeuticsMD (TXMD, $5.00, down $0.08)
TXMD December 7.50 calls (TXMD171215C00007500, $0.25, flat)
Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Stop Target: None
Action: Support is at $5-$4.75 with Friday’s low reaching $4.97. Resistance is at $5.25.
TiVo (TIVO, $19.70, up $0.05)
TIVO October 20 calls (TIVO171020C00020000, $0.60, flat)
Entry Price: $0.70 (8/8/2017)
Exit Target: $1.40
Stop Target: None
Action: Resistance is at $19.75-$20 with a close above $20.25 needed for a possible breakout. Support is at $19.50-$19.25.