MomentumOptions.com Pre-Market Update for 11/6/2017
Dow/ S&P 500 Up 8-Straight Weeks
U.S. markets finished Friday mostly higher while setting record highs with the Dow and S&P 500 working on 8-week winning streaks for the first time in four years. The Nasdaq is riding a six-week winning streak after gaining 0.7% and was up nearly 1% for the week. The Russell 2000 struggled after spending much of the session underwater while closing slightly lower and ending the week with a 1% pullback.
The Dow added 23 points, or 0.1%, to end at 23,539. The blue-chips traded down to 23,481 shortly after the open with rising support at 23,300-23,250 holding. There is risk to 23,100-23,000 on a move below the latter. The rebound to an all-time high of 23,557 cleared upper resistance at 23,500-23,550. Continued closes above the latter gets 23,800-24,000 in play.
The S&P 500 gained 8 points, or 0.3%, to settle at 2,587. The index slipped 3 points to 2,576 during the morning action with fresh support at support at 2,570-2,565 holding. A move below 2,560 would be a slightly bearish signal. The run to 2,588 pushed resistance at 2,585-2,590 with continued closes above the latter leading towards 2,600-2,625.
The Nasdaq rallied 49 points, or 0.7%, to close at 6,764. Tech dipped 2 points on Friday’s open to 6,712 Support is at 6,700-6,675 easily holding. A close back below 6,650 would be a yellow flag. The surge to 6,765 and lifetime high keeps new resistance at 6,775-6,800 in the mix.
The Russell 2000 gave back a point, or 0.1%, to end at 1,494. The small-caps kissed 1,490 with support at 1,485-1,480 standing tall. A move below the latter would be a bearish development. The one-point pop to 1,497 intraday failed lower resistance at 1,500-1,510 for the second-straight session and third-straight close below the 1,500 level.
The S&P 500 Volatility Index ($VIX, 9.14, down 0.79) dropped 8% after trading to a low of 8.99. Fresh support is at 9-8.50 with the 52-week low at 8.84. Lowered resistance is at 10-10.50 and a downward sloping 50-day moving average. A move above 11.50 will likely be a good clue on uncoming volatility.
Sector leaders from Friday included Technology and Healthcare with both rising 0.8%. Financials led the sector laggards after falling 0.4%. For the week, the Energy sector rose 2% while Consumer Discretionary fell 0.8%.
Q3 results from 406 S&P 500 members that combined account for 85.4% of the index’s total market capitalization. Total earnings for these companies are up 7.5% from the same period last year on 6.3% higher revenues, with 73.9% beating EPS estimates and 66.7% topping revenue estimates.
Looking at Q3 as a whole, combining the actual results from the 406 S&P 500 members that have come out with estimates for the still-to-come 94 index members, total earnings are expected to be up 6.5% from the same period last year on 5.6% higher revenues.
Excluding the weak results from the Finance sector, total earnings for the rest of the index would be up 9.6% on 6.1% revenue growth.
The Technology sector has been impressive, with Q3 results from 85% of the sector’s market cap in the S&P 500 index. Total earnings for these Tech companies are up 22.4% from the same period last year on 9.3% higher revenues, with 81.8% topping EPS estimates and 86.4% clearing revenue estimates.
Total Q3 earnings for the S&P 500 index are on track to reach a new all-time quarterly record, surpassing the previous record reached in the preceding earnings season.
The iShares Micro-Cap ETF (IWC) is trying to hold near-term support at $93 after trading to an all-time high of $96.77 in early October. A move below $93 opens up risk to $92.25-$92 and the 50-day moving average. This area represents the gap high from late September. Current resistance is at $94-$94.50 with a close above $95 being a bullish development. RSI has been in a downtrend since early October after peaking near the 90 level and appears to be leveling out. A move above 50-55 could lead to continued strength.
The Technology Select Sector Spiders (XLK) traded to a 52-week high of $63.55 on Friday with fresh resistance at $65-$65.50 on continued closes above $63.50. The all-time intraday high of $65.44 was reached in March 2000. Current support is at $63-$62.50. A close below $62 would be a slightly bearish development leading to a continued backtest towards $61.25-$60 and the late October breakout. RSI is in overbought territory and is pushing late May resistance just above 80.
With 3Q earnings seasons slowing, the market could be due for a breather at some point this month. However, we will let price action dictate on when a pullback could come and when we should lighten up on bullish positions. Otherwise, stay long and strong until the bears start showing a stronger attack.
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.
TiVo (TIVO, $17.30, down $0.65)
January 20 calls (TIVO180119C00020000, $0.30, down $0.30)
Entry Price: $0.60 (10/31/2017)
Exit Target: $1.20
Stop Target: None
Action: Fresh support is at $17.25-$17 with Friday’s low tapping $17.10. Lowered resistance is at $17.50-$17.75. The company missed earnings expectations after Thursday’s close but have been signing a number of deals. I still like the trade as long as $17 holds.
Ford (F, $12.36, down $0.06)
November 12 calls (F171117C00012000, $0.40, down $0.05)
Entry Price: $0.45 (10/11/2017)
Exit Target: $0.90
Stop Target: None
Action: Resistance at $12.40-$12.50. Support is at $12.20-$12.10.
Limelight Networks (LLNW, $5.20, flat)
LLNW December 4 calls (LLNW171215C00004000, $1.30, flat)
Entry Price: $0.37 (9/21/2017)
Exit Target: $2.00 (Limit Order on half at $2)
Stop Target: $1 (Stop Limit)
Action: Resistance is $5.35-$5.40. Support is at $5.15-$5.10 with a move below $5 likely triggering the Stop Limit.
TherapeuticsMD (TXMD, $4.36, down $0.25)
TXMD December 7.50 calls (TXMD171215C00007500, $0.20, down $0.05)
Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Stop Target: None
Action: Support is at $4.25-$4. Resistance is at $4.50. There could be pending news this week concerning one of the company’s drugs.