Pre-Market for 3/19/2018

Bears Get Weekly Win

8:00am (EST)

The market finished higher on Friday but closed the week with losses as Wall Street prepares for this week’s two-day Federal Open Market Committee meeting that starts on Tuesday. The Fed is widely expected to deliver the first rate increase of 2018 under Fed Chairman Jerome Powell’s first as chairman of the central bank.

While the market may have fully priced in a quarter-percentage point rate increase, traders will parse the wording of the accompanying statement and Powell’s subsequent news conference for clues on market direction afterwards.

The Nasdaq closed in the green by a quarter-point, or 0.00%, after reaching a late day peak of 7,514 but closed below the 7,500 level for the third-straight session. The Russell 2000 showed the most strength after advancing 0.6% and testing a high just south of 1,589 but closed below the 1,600 level for the 4th-straight session. For the week, Tech gave back 1% while the small-caps dropped 0.7%.

The Dow climbed 0.2% after testing to a high of 25,031 with resistance at the 25,000 level holding for a second-straight session. The S&P 500 also added 0.2% after making an intraday run to 2,761 while closing back above its 50-day moving average and snapping a four-session losing streak. For the week, the Dow fell 1.6% while the S&P 500 stumbled 1.3%.

Utilities and Energy rose 0.9% to led sector strength while Real Estate and Industrials were up 0.5%. Consumer Staples and Technology dipped 0.1% to pace sector laggards on Friday.

Utilities jumped 1.7% for the week while Real Estate rallied 0.9% and were the only sectors that showed gains. Materials tanked 3.5% and Financials fell 2.8% and were the worst performing sectors.

The S&P 500 Volatility Index ($VIX) fell for a second-straight session after trading down to 15.23 intraday. Upper support at 15-14.50 held with a close below the latter being a continued bullish signal for the market. Resistance is at 16.50-17 and the 50-day moving average with risk to 19.50-20, if breached.

RSI is in a slight downtrend with long-term support at 40 and levels that has been holding since late April and early May of last year.

The Russell 3000 Index ($RUA) snapped a 3-session slide following Friday’s push to 1,634. Lowered resistance at 1,635-1,640 with additional hurdles at 1,650-1,655. A close back above 1,660 would be a very bullish development. Near-term support is at 1,625-1,615 and the 50-day moving average with a close below the latter being a slightly bearish development.

RSI is trying to hold support at 50 with a move below this level being a slightly bearish development for another backtest to 45-40. Resistance is at 60.

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The Consumer Discretionary Select Spiders (XLY) declined for a 4th-straight session with Friday’s low tapping $105.17. Near-term support at $105-$104.50 and the 50-day moving average. A close below $104 would be a bearish signal. Resistance is at $105.50-$106 followed by $107-$107.50.

RSI has been consolidating near support at 50 with a close below this level leading to a possible backtest to the 45-40 area. Resistance is at 60 that represented February’s peak.

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The percentage of S&P 500 stocks trading above the 50-day moving closed Friday at 48.21% with near-term resistance at 50%-55%. A close above the 60% level would be a bullish development. Support is at the 40% level.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average is currently at 75.49% and Friday’s high. Early February resistance is at 76%-78% followed by 80% and January support levels. A close below 70% would be a slightly bearish development.

In economic news, January JOLTS Job Openings came in at 6,312,000 and easily topping forecasts of 5,800,000.

Housing Starts fell 7% to a 1.24 million rate in February, while building permits dropped 5.7% to a 1.3 million rate, both of which were worse than expectations of 1.28 million and 1.32 million rates, respectively.

Industrial production grew 1.1% month-over-month in February, topping expectations for a 0.4% increase.

The University of Michigan consumer confidence index rose to 102 in the preliminary reading for March, above forecasts for a slip to 98.8 and below February’s reading of 99.7.

Atlanta Fed’s Q1 GDPNow estimate was trimmed again to 1.8% from 1.9%, continuing to veer below the 2.5% Blue Chip economist consensus. The nowcast of Q1 real private fixed-investment growth increased from 2.4% to 3.3%.

Baker-Hughes reported the U.S. rig count was up 6 rigs from last week to 990, with oil rigs up 4 to 800, gas rigs up 1 to 189, and miscellaneous rigs up 1 to 1. The U.S. Rig Count is up 201 rigs from last year’s count of 789, with oil rigs up 169, gas rigs up 32, and miscellaneous rigs unchanged at 1. The U.S. Offshore Rig Count was unchanged at 13 rigs and down 6 rigs from last year’s count of 19.

Market history tends to show some strength mid-month with weakness late in March that can be attributed to end of the quarter squaring of the books. April is typically bullish for the Dow and the start of 1Q earnings season will begin. Depending on this week’s Fed news, the exact opposite could happen and the week after March expiration has seen some wild market swings over the years.

With the portfolio light, I have a plethora of possible new trades, both bullish and bearish. We still need to wait for clear market signals to see if a major breakout, breakdown, or a volatile trading range ensues over the near-term. The most important clue will likely be the VIX on a close above 17.50 or below 15.

Momentum Options Play List

Closed Momentum Options Trades for 2018: 12-6 (67%). 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.

Boston Scientific (BSX, $27.93, up $0.09)

BSX April 29 calls (BSX180420C00029000, $0.28, up $0.04)

Entry Price: $0.26 (3/16/2018)
Exit Target: $1.00
Return: 8%
Stop Target: None

Action: Set an Exit Target at $1.00. I normally target 100% return on all trades but with this position, if shares touch $30 by mid to late April, these calls will be $1 in -the-money. Volume topped nearly 3,000 contracts in these calls on Friday.

Resistance is at $28-$28.25. Support is at $27.75-$27.50 and the 200-day moving average. The 50-day moving average is track to clear the 200-day moving to form a golden cross. This is typically a bullish sign for higher highs.

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Marvell Technology (MRVL, $23.18, down $0.01)

MRVL April 25 calls (MRVL180420C00025000, $0.30, down $0.05)

Entry Price: $0.70 (3/6/2018)
Exit Target: $1.40
Return: -58x%
Stop Target: None

Action: Support is at $23 and the 50-day moving average with a close below $27.75 being a bearish development. Resistance is at $23.50.

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Progenics Pharmaceuticals (PGNX, $8.44, up $0.14)

PGNX May 8 calls (PGNX180518C00008000, $1.60, up $0.10)

Entry Price: $0.65 (2/27/2018)
Exit Target: $2
Return: 146%
Stop Target: 95 cents (Stop Limit)

Action: Fresh resistance is at $8.50-$8.75 following Friday’s run to $8.48. Rising support is at $8-$7.75.

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Sony (SNE, $50.64, down $0.70)

SNE April 52.50 calls (SNE180420C000525000, $0.70, down $0.40)

Entry Price: $1.15 (2/26/2018)
Exit Target: $2.30
Return: -39%
Stop Target: 60 cents, lower to 50 cents (Stop Limit)

Action: Lower the Stop Limit from 60 cents to 50 cents to give the trade some wiggle room. Friday’s low tapped 65 cents.

Support is at $50.50-$50 following Friday’s backtest to $50.35. Resistance is at $51.

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