Pre-Market for 2/26/2018

Bulls Get 2nd-Straight Weekly Win

8:00am (EST)

The market surged in the final hour of trading on Friday to finish the week in positive territory. It was the second-straight week of gains for the major indexes following the 10% overall correction from earlier this month with nearly half of the losses recovered.

The Dow jumped 1.4% after testing a high of 25,313 while closing above the 25,000 level for the first time in four sessions. The S&P 500 soared 1.6% after reaching an intraday peak of 2,747 while closing a half-point off its high. For the week, the Dow was up 0.4% while the S&P 500 added 0.6%.

The Nasdaq zoomed 1.8% after making a run to 7,337 into the closing bell while clearing the 7,300 level for the first time since the start of the month. The Russell 2000 rallied 1.3% making another run at its 50-day moving average. The index fell shy of holding this level for a 5th-straight session by a tenth-point after closing at 1,549. For the week, the Nasdaq advanced 1.4% while the Russell 2000 climbed 0.4%.

Utilities led sector strength after rising 2.6% while Energy and Technology were higher by 2.2% and 2.1%. There were no sectors laggards on Friday.

For the week, all sectors finished in the red with Consumer Staples taking the hardest hit after falling 2.8%. Energy and Utilities were down 1.4% and 1.2%.

The VelocityShares Daily Inverse VIX (ZIV) rocketed 3.4% after trading to a high of 71.59. Prior resistance at 70.50-71 was cleared and will try to serve as short-term support. More importantly, the close above the 70 level was the first in four sessions and the highest level reached since February 5th. The gap lower and below the 200-day moving average north of 75 could be retraced on closes above 72-72.50.

RSI is back in an uptrend with near-term resistance at 50. Support is at 40.

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The Spider S&P 500 ETF (SPY) soared 1.6% after closing on Friday’s high of $274.71 while settling back above its 50-day moving average. Fresh resistance is at $275-$275.50 with continued closes above the latter getting $277-$277.50 in play. Rising support is at $272.50-$272.

RSI cleared near-term resistance at 50 with continued closes above this level keeping 60 in the mix. Support is at 40 if 50 fails to hold.

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The Health Care Select Sector Spider (XLV) also rallied 1.6% after reaching a peak of $85.36 to clear and hold its 50-day moving average. Fresh resistance is at $85.50-$86 with a close above the latter being a very bullish signal for a run towards $87.50-$88. Support is at $84.25-$84 with a close below the latter signaling additional weakness.

RSI is trying to hold mid-month resistance at 50 and a level that served as December support. Continued closes above 50 would be a bullish signal for a run at 60, possibly 70, depending on strength.

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The percentage of S&P 500 stocks trading above the 200-day moving is currently at 68.51% and Friday’s high. Resistance is at 70%-71% and mid-month highs with continued closes above this level could leading to a quick run towards 75%. This level served as previous support throughout December. A close back below the 65% level would be a slightly bearish development.

The percentage of Nasdaq 100 stocks trading above the 50-day moving average is currently at 60.57%. A mini-trading range between 50%-60% was in place throughout last week with Friday’s close above the latter being a slightly bullish development with near-term resistance at 62.5%-65%. Support is at 55%-50% with a close back below 60%.

The Fed’s MPR from Friday didn’t offer anything new in its summary, and read much like the FOMC minutes. The report said activity increased at a solid pace over the second half of 2017 and that the labor market continued to strengthen. It also reiterated 12-month inflation has remained below target and added that despite the tight labor market, wage growth has been moderate, in part held down by low productivity growth. The Fed also indicated that resource slack and commodity prices along with movements in the U.S. dollar appear to explain inflation’s behavior fairly well.

There was nothing in the report to suggest the FOMC will stray from its gradualist normalization approach for now, leaving a March rate hike on tap, and likely more tightening down the road. The report will be the basis for Fed Chairman Jerome Powell’s congressional testimony on Tuesday as it was moved up a day from Wednesday’s originally planned testimony.

I could have 1-2 New Trades today so stay locked-and-loaded throughout the morning in case I take action.

Momentum Options Play List

Closed Momentum Options Trades for 2018: 8-5 (62%). 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.

Bank of America (BAC, $32.03, up $0.34)

BAC March 33 calls (BAC180316C00033000, $0.20, flat)

Entry Price: $0.50 (2/15/2018)
Exit Target: $1.00
Return: -60%
Stop Target: None

Action: Fresh resistance is at $32.25-$35.50 following Friday’s run to $32.06. Support is at $31.75-$31.50.

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Viavi Systems (VIAV, $9.76, up $0.10)

VIAV March 10 calls (VIAV180316C00010000, $0.20, flat)

Entry Price: $0.45 (2/6/2018)
Exit Target: $0.90
Return: -55%
Stop Target: None

Action: Resistance is at $10. Support is at $9.75-$9.50.

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