Pre-Market Update for 10/30/2017

Small-Caps Still Struggling with Resistance

8:00am (EST)

The market closed in record territory on Friday with the Dow and S&P 500 extending their weekly winning streak to 7-straight with the latter setting a fresh intraday all-time and closing high. The Nasdaq posted a strong session after rising 2.2% following better-than-expected earnings from a number of Tech companies after Thursday’s closing bell. The move above the 6,700 level and new lifetime high could lead to a blowoff top towards Nasdaq 7,000 at some point.

Meanwhile, the Russell also settle in the green and back above the 1,500 level but closed the week with a one-point loss. The index has gone 16 sessions without taking out its all-time high north of 1,514 set at the beginning of the month. This remains a slightly bearish signal.

Sector strength for Friday included Technology and Consumer Discretionary with gains of 2.7% and 1.6%, respectively. For the week, the aforementioned sectors were up 2.4% and 1.1%. Laggards were led by Consumer Staples and Materials with declines of 0.9% and 0.5%. Healthcare and Real Estate posted the largest weekly losses after falling 2% and 1%, respectively.

The results from nearly half of the S&P 500 members that have reported, combined, have account just over 50% of the index’s total market capitalization. Total earnings for these companies are up nearly 8% from the same period last year on 5% higher revenues, with over 75% beating EPS estimates and 65% topping revenue estimates.

Looking at Q3 as a whole, combining the actual results results with estimates from the upcoming S&P 500 companies, total Q3 earnings are expected to be up over 4% from the same period last year on over 5% higher revenues.

While the Q3 earnings growth pace is below what the index had seen in the first two quarters of the year, the overall level of total earnings for the S&P 500 is on track to reach a new quarterly record, surpassing the record reached in the preceding quarter.

The VelocityShares Daily Inverse VIX (ZIV) closed back above the 80 level after reaching a peak of 81.18. Prior resistance at 81.50-82 is back in play with the recent all-time high at 81.45. A move above 83 could lead to spike towards 84.50-85. Shaky support is at 80-79.50 with another move below 78 signaling a false breakout and upcoming market weakness.

The iShares Russell 3000 ETF (IWV) traded in a tight range between $151-$152 into mid-month following the breakout above $150 to start October. The recent all-time peak reached $152.91 last Monday and was matched on Friday’s intraday high.

Continued closes above resistance at $152.75-$153 would be bullish for a possible push towards $154.50-$155. Fresh support is at $152-$151.75 with a close below $151-$150.50 being a bearish development for a continued backtest towards $149-$148 and the 50-day moving average. Last Wednesday’s intraday low hit $150.61. RSI held near-term support at 60 last week and is back in an uptrend with resistance at 80 on continued strength.

The Utilities Select Spider (XLU) held last Wednesday’s breach below the 50-day moving average following a low of $54.05. Current support is at $54.50-$54.25 with a close under the latter being a bearish signal. The intraday rebound to $55.24 on Thursday was followed by Friday close above lower resistance at $55-$55.25. The recent all-time reached $55.90 and would be back in play on a close above the latter with additional hurdles at $56.25-$56.50. RSI has cleared 60 with continued closes above this level likely leading to a retest to resistance at 70 and a level that has been holding since mid-June.

This is a big week for earnings and numbers have been superb. However, it is imperative the small-caps clear and hold the 1,515 level while breaking out to fresh all-time highs.


Momentum Options Play List

Closed Momentum Options Trades for 2017: 50-20 (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.


I apologize for not sending an afternoon update on Friday, it is rare I miss an update. Unfortunately, travel and traffic near DC was a major issue along with check-in. Good news is, I got some great sight seeing in and a lot of good research accomplished.


Ford (F, $12.06, down $0.21)

November 12 calls (F171117C00012000, $0.30, down $0.10)

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

Action: Lower support at $12.00-$11.900 held on Friday’s backtest to $12.01. Resistance is at $12.15-$12.20.


Limelight Networks (LLNW, $4.88, down $0.02)

LLNW ‪December 4‬ calls (LLNW171215C00004000, $0.95, flat)

Entry Price: $0.37 (9/21/2017)
Exit Target: $1.20 (Limit Order on half at $1.20)
Return: 157%
Stop Target: 75 cents (Stop Limit)

Action: Friday’s high tapped $5.05. Resistance is at $5-$5.25. Support is at $4.75-$4.70.


TherapeuticsMD (TXMD, $4.80, up $0.23)

TXMD December 7.50 calls (TXMD171215C00007500, $0.20, flat)

Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Return: -79%
Stop Target: None

Action: Support is at $4.50. Resistance is at $4.70-$4.75.