MomentumOptions.com Pre-Market Update for 11/13/2017
Bears Snap Bulls Winning Streaks
The market was weak throughout Friday with the Dow and S&P 500 finishing in the red for the second-straight session. Both indexes ended the week lower for the first time in 9 weeks.
The Nasdaq held near-term support before making a late day run into positive territory by nearly a point but had its 6-week winning streak snapped.
The Russell 2000 also closed slightly higher by a quarter-point but finished the week with nearly a 2% loss while holding its 50-day moving average.
Consumer Staples were strong with the sector gaining 1% to end the week up 2.2%. Real Estate surged 3.2% while Energy jumped 1.4% for the week.
The Healthcare sector dropped 0.6% to pace sector laggards. For the week, Financials were hit the hardest with the sector falling 2.6%. Materials and the Industrial sectors gave back 1.2% and 1.1%, respectively.
With roughly 90% of total earnings for the S&P 500 members that have reported, earnings are up 6.8% from the same period last year on 6.2% higher revenues. Over 73% have beat EPS estimates with 67% topping revenue estimates.
For the quarter as whole, total Q3 earnings for the S&P 500 index are expected to be up 6.2% from the same period last year on 5.7% higher revenues, with strength in the Technology and Energy sectors offsetting weakness from the Finance sector. Excluding the Finance sector drag, Q3 earnings would be up 9.8% from the same period last year.
For full-year 2017, total earnings for the S&P 500 index are expected to be up 7.2% on 4.7% higher revenues, and would follow 0.7% earnings growth on 2.2% higher revenues in 2016. Index earnings are expected to be up 11.5% in 2018 and 9.8% in 2019.
Earnings growth is on track to turn positive in Q3 for the small-cap S&P 600 index, with total earnings for the index expected to be up 5% from the same period last year on 5.6% higher revenues. This would follow persistent earnings declines of negative growth in 3 of the last 4 quarters.
While overall Q3 earnings growth represents a deceleration from the double-digit growth pace of the last two quarters, the growth rate is expected to ramp up in the current and coming quarters, with Q4 earnings growth currently expected at 8.4%.
The VelocityShares Daily Inverse VIX (ZIV) closed in negative for the 8th-straight session after testing a low of 77.68. Upper support at 78-76 failed to hold into Friday’s close with a move below the latter and the 50-day moving average being a continued bearish signal. Lowered resistance is at 79-79.50. RSI is approaching early September near 40 and remains in a downtrend with risk to 30 and early August support.
The Spider S&P 500 ETF (SPY) traded to an all-time high of $259.35 last Tuesday with continued closes above $258 keeping fresh resistance at $259.50-$260 in the mix. A prior trading range between $256-$258 since late October had formed ahead of the breakout to lifetime highs with a close above the former being a slightly bearish development. RSI is trying to hold mid-October support near the 60 level with a close below this level likely leading towards a further backtest towards 50.
The Real Estate Select Sector Spider (XLRE) cleared early September resistance at the $33.25 level while kissing $33.97 last Thursday and a fresh 52-week peak. Near-term resistance is at $34-$34.25 with a move above the latter getting the late July 2016 high of $34.77 in play. Support is at $33.50-$33.25 with a close back below the latter signaling a short-term top.
RSI recently cleared June and September resistance above 70 and appears to flattening out. A move back below this level would signal upcoming weakness.
This will be an important week for the bulls with the bears carrying a little momentum. Third-quarter earnings season has justified higher market prices but they will become less of a factor in the coming weeks. The proposed U.S. tax cuts bill will take center stage and the market is obviously pricing something getting done this year. As the rhetoric heats up, volatility could return.
The S&P 500 Volatility Index ($VIX, 11.29, up 0.79) jumped over 7% after trading to a high of 11.58. The close above the 100-day moving average was a slightly bearish development fresh resistance at 11.50-12.50. Rising support is at 10.50-10.
The VIX and the small-caps will likely give us the best clues this week on how the trend will likely play out.
Momentum Options Play List
Closed Momentum Options Trades for 2017: 50-21 (70%). 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, $16.85, down $0.45)
January 20 calls (TIVO180119C00020000, $0.30, down $0.05)
Entry Price: $0.60 (10/31/2017)
Exit Target: $1.20
Stop Target: None
Action: Support is at $16.75-$16.50 following Friday’s backtest to $16.70. Resistance is at $17-$17.25.
Limelight Networks (LLNW, $5.90, up $0.24)
LLNW December 4 calls (LLNW171215C00004000, $1.90, up $0.30)
Entry Price: $0.37 (9/21/2017)
Exit Target: $2.50 (Limit Order on half at $2.50)
Stop Target: $1.45, raise to $1.60 (Stop Limit)
Action: Raise the Stop Limit from $1.45 to $1.60 to further protect profits.
Upper resistance at $5.75-$6 was cleared on Friday’s run to $6.01. Continued closes above this level gets $6.50-$7 in play. Rising support is at $5.75-$5.70.
TherapeuticsMD (TXMD, $5.67, up $0.06)
TXMD December 7.50 calls (TXMD171215C00007500, $0.20, flat)
Entry Price: $0.95 (8/17/2017)
Exit Target: $1.90
Stop Target: None
Action: Support is at $5.50-$5.25. Resistance is at $5.75-$6.