Pre-Market Update for 10/16/2017

Small-Caps Slack Despite Record Highs

8:00am (EST)

U.S. markets traded mostly higher on Friday with the Dow and S&P 500 trading to fresh all-time highs while closing on 5-week winning streaks. The Nasdaq also tapped a new intraday and record high while closing in positive territory for the 3rd-straight week. Meanwhile, the Russell 2000 lost a little ground and finished the week lower while holding the 1,500 level.

The Dow gained 30 points, or 0.1%, to end at 22,871. The blue-chips traded in positive territory while reaching an all-time high of 22,905. Lower resistance at 22,850-23,000 was cleared. Support at 22,600 has been holding for 9-straight session with risk to 22,400-22,350 on a move below this level.

The S&P 500 added 2 points, or 0.1%, to close at 2,553. The index also held green from the open while tapping a lifetime high of 2,557 intraday. Lower resistance at 2,560-2,575 remains in play on continued closes above 2,550. Support at 2,540 has been holding for 7-straight sessions with backup help at 2,525-2,520.

The Nasdaq climbed 14 points, or 0.2%, to settle at 6,605. Tech traded above the 6,600 level throughout Friday’s action while tapping a record high of 6,616. Fluff and fresh resistance are at 6,625-6,650. Support remains at 6,575-6,550.

The Russell 2000 slipped 2 points, or 0.2%, to finished at 1,502. The small-caps tested a high of 1,508 shortly after the open with resistance at 1,515-1,525 holding. The 1,115 area has been holding 8-straight session following the all-time highs north of 1,514 on back-to-back sessions. Support at 1,500-1,490 held on the fade to the session low into Friday’s close. The 1,500 level has held for 10-straight sessions and the 1,490 the prior session. A close below the latter opens up risk to 1,475-1,470.

The S&P 500 Volatility Index ($VIX, 9.61, down 0.30) tested a high of 9.88 on the open with lower resistance at 10.50-11.50 easily holding. Lower support at 9.75-9.50 was breached with the low hitting 9.44 midday. The 52-week low is at 8.84.

Technology, Materials and Consumer Discretionary were Friday’s sector leaders with all gaining 0.5%. Real Estate closed the week 1.9% higher to top sector strength. Utilities were the weakest link after falling 0.7%. However, the sector showed a gain of 1.4% for the week. The Financial sector was the week’s laggard, dropping 0.8%, overall.

The percentage of S&P 500 stocks trading above the 50-day moving average is currently at 74% with Friday’s peak reaching clearing the 76% level and a 6-month high. This area served as prior resistance in mid-June and mid-July and is showing signs of continued momentum. The February peak reached 78% and the one-year high reached 82% in early January. A move below 70% would be a bearish signal and when the S&P 500 would start to show signs of topping out.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average is currently just below the 72% level. A move above 72.5%-73% and resistance from mid-August and mid-September would signal continued momentum towards 75%. A move back below 67.5% could signal upcoming market weakness for Tech.

The VelocityShares Daily Inverse VIX (ZIV) traded to another all-time intraday high of 78.98 to clear lower resistance at 78-80 and levels we have continued to highlight. A move above the latter could lead to a short-term surge towards 82-83.50 and where a market peak could occur. RSI is nearing short and longer-term resistance at 70 but could push 80 with this area representing August and May highs. Rising support is at 78-77.50 with a close back below 76 signaling a short-term market top.

The iShares PHLX Semiconductor ETF (SOXX) also made another all-time high after kissing $165.58 intraday. Continued closes above $165 could lead to fluff towards $166.50-$167.25. RSI challenged early June resistance near 80 last week and is still in play on continued momentum. Fresh support is at $163.75-$162.50 with a move below the latter signaling a possible short-term peak.

This week’s key will be how the small-caps holding support, or clearing resistance, and how the overall market reacts to a busy start to 3Q earnings season.

I wanted to provide a snapshot of the portfolio YTD. While there is a chance I could have a loser this week, overall, I’ve been hot with us closing our last 8 winners for fantastic gains. Having a 300%, and two 200% winners, during the summer doldrums was about as good as it gets.


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.


Ford (F, $12.05, down $0.07)

November 12 calls (F171117C00012000, $0.30, down $0.05)

Entry Price: $0.45 (10/11/2017)
Exit Target: $0.90
Return: -33%
Stop Target: None

Action: Lower support at $12-$11.75 held following Friday’s backtest to $11.87. Resistance is at $12.15-$12.20.


Cypress Semiconductor (CY, $15.86, up $0.10)

CY November 16 calls (CY171117C00016000, $0.70, up $0.05)

Entry Price: $0.45 (10/2/2017)
Exit Target: $0.90
Return: 56%
Stop Target: 55 cents (Stop Limit)

Action: Friday’s high reached $16.09. Resistance is at $16-$16.25. Support is at $15.75-$15.50.


Limelight Networks (LLNW, $4.35, up $0.05)

LLNW ‪December 4‬ calls (LLNW171215C00004000, $0.55, flat)

Entry Price: $0.37 (9/21/2017)
Exit Target: $0.80-$1.20
Return: 49%
Stop Target: None

Action: Resistance is at $4.50. Support is at $4.20 followed by $4-$3.90.


TherapeuticsMD (TXMD, $4.58, down $0.10)

TXMD December 7.50 calls (TXMD171215C00007500, $0.15, flat)

Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Return: -84%
Stop Target: None

Action: Support is at $4.50. Resistance is at $4.75-$5.

TiVo (TIVO, $18.75, up $0.25)

TIVO ‪October 20‬ calls (TIVO171020C00020000, $0.15, flat)

Entry Price: $0.70 (8/8/2017)
Exit Target: $1.40
Return: -79%
Stop Target: None

Action: Shares closed on lower resistance at $18.75-$19 on the intraday run to $18.90. Support is at $18.50-$18.25. If shares can’t clear $19.50 by Tuesday’s close, I could exit the trade to save the remaining premium as these calls expire this Friday.