Pre-Market Update for 6/4/2018

Bulls Hold Momentum Despite Choppiness

8:00am (EST)

The market opened sharply higher on Friday following a superb monthly jobs report and easing geopolitical concerns. The momentum lasted throughout the first half of action with the major indexes trading in a narrower range afterwards and into the closing bell. Volatility calmed and closed below a major level of support to suggest a continued rally towards prior all-time and fresh record highs.

The Nasdaq surged 1.5% after making an intraday push to 7,557 while clearing and holding the 7,500 level for the first time since mid-March. The index is just over 1% away from taking out its all-time high of 7,637 set on March 13th and was up 1.6% for the week.

The Russell 2000 rallied 0.9% following a run to 1,650 and coming within a point of its midweek all-time high. The small-caps advanced 1.3% for the week with upside towards 1,675-1,680 on continued momentum.

The S&P 500 soared 1.1% on the midday gallop past 2,736. The index rose 0.5% for the week with a close above the 2,750 level being a continued bullish signal. 

The Dow gained 0.9% after reaching a peak of 24,673 but needs to clear resistance at 24,800-25,000 to regain lost momentum. The index was down 0.5% following a shortened week of choppy trading and more affected by the geopolitical concerns.

Technology led sector strength after surging 1.7% while Materials were higher by 1.5%. Financial, Health Care, and the Industrials were up 1.1%. Utilities were the only sector laggard after sinking 1.5%. 

For the week, Energy advanced 2.4% while Technology rose 1.9%. Real Estate added 1.7% to pace sector leaders. Financials were down 1.3% with Industrials and Utilities off 0.6%.

The S&P 500 Volatility Index ($VIX) traded lower throughout the session while bottoming at 13.37 intraday. I mentioned last week a close back below major support at 14-13.50 and the 200-day moving average would be a bullish signal heading into the first full week of trading for June. 

I also stated in mid-May that continued closes below 12.50 are needed for the bulls to make a sustained run towards all-time market highs. As you can see from the chart, this level held for two weeks as a major floor of support. 

Lowered but shaky resistance is at 14.50-15 with additional hurdles and backup help at 16.50-17. A move back above 17.50 will likely signal another round of selling pressure.

RSI is back in a downtrend with support at 40. Continued closes back below this level would be a bullish development for another retest towards 35-30. Resistance is at 50-55 followed by the late May peak near the 60 level.

Trading graph

The Russell 2000 ETF (IWM) has traded higher in two of three sessions but has peaked at $164.38 in back-to-back sessions. The all-time of $164.39 was set midweek with resistance at $164.50-$165. Continued closes above the latter could lead to a run towards $167-$167.50 depending on momentum.

Support is at $163-$162.50 with a move below $162 being a possible warning sign for lower lows.

RSI recently tested January resistance at 70 with continued closes back above this level signaling additional strength. Support is at 60-55 with a move below the latter signaling upcoming weakness.

Trading graph

The Technology Select Sector Spiders (XLK) closed higher for the third-straight session while reaching a peak of $71.10. Lower resistance at $71-$71.50 held with the March 13th all-time high at $71.34. Continued closes above $71.50 could lead to a short-term push towards $72.50-$73 on a double-top breakout. 

Rising support is at $70.50-$70 with a close below $69.50 signaling another short-term top.

RSI is back in an uptrend with early May resistance at 70. A move above the latter would signal additional strength and a possible push towards 75-80 and January peaks. Support is at 65-60.

Trading graph

The percentage of S&P 500 stocks trading above the 50-day moving average closed Friday at 60.03%. Lower resistance at 60%-65% held on the intraday peak of 60.91% with the late May high reaching 65.14%. Continued closes above the 65% level would be bullish for a possible push towards 70% and December and January support levels. Current support is at 55%-50%.

The percentage of Nasdaq 100 stocks trading above the 200-day moving average settled at 61.16%. Current resistance is at 63%-65% with the latter representing the mid-April peak. Friday’s high reached 61.16% and a level that has held for 3-straight sessions. Continued closes above the 65% level would be a bullish signal for a run towards 70% and mid-March support. Current support is at 56%-55% with a move below the latter being a slightly bearish signal.

I have talked about a continued rally into mid-June on continued and today will be an important follow thru session for the bulls. Old Tech, and new, are still showing strength with the overall market acting like it wants to trade to fresh all-time highs. With the small-caps testing blue-sky territory, it will be an important week for the bulls.

I have updated our current trades and I could have additional New Trades this morning or in the midday update.

Momentum Options Play List

Closed Momentum Options Trades for 2018: 21-11 (66%). 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 Daily updates.

CVS Health (CVS, $64.07, up $0.68)

CVS July 67.50 calls (CVS180720C00067500, $0.90, up $0.02)

Entry Price: $0.85 (6/1/2018)

Exit Target: $1.70

Return: 4%

Stop Target: None

Action: Near-term resistance is at $64.25-$64.75 and the 50-day moving momentum with Friday’s high tapping $64.21. A close above $65 would be a continued bullish development. Support is at $63.50-$63. A close below the latter could lead to additional weakness.

Trading graph (ALRM, $45.16, up $0.73)

ALRM July 47.50 calls (ALRM180720C00047500, $0.75, up $0.15)

Entry Price: $0.65 (6/1/2018)

Exit Target: $1.30

Return: 18%

Stop Target: None

Action: Fresh resistance is at $45.25-$45.75 following Friday’s push to $45.39. A close above $46 should lead to a continued run towards $49-$49.50 and possibly fresh 52-week highs. Support is at $45-$44.50.

Trading graph

AstraZeneca (AZN, $36.81, down $0.22)

AZN June 37.50 calls (AZN180615C00037500, $0.35, down $0.10)

Entry Price: $0.45 (5/21/2018)

Exit Target: $0.90-$1.35

Return: -17%

Stop Target: None

Action: Shares traded to a low of $36.48 with support is at $36.75-$36.50 holding. Resistance at $37-$37.25.

Trading graph

Progenics Pharmaceuticals (PGNX, $7.99, up $0.39)

PGNX August 8 calls (PGNX180817C00008000, $1.65, up $0.30)

Entry Price: $1.00 (5/9/2018)

Exit Target: $2.00

Return: 65%

Stop Target: $1.05, raise to $1.20 (Stop Limit)

Action: Raise the Stop Limit from $1.05 to $1.20.

Friday’s high reached $8.19 with fresh resistance at $8.25-$8.50. The 52-week peak is at $8.63. Rising support is at $7.75-$7.50.

Trading graph

Rambus (RMBS, $13.60, up $0.14)

RMBS June 14 calls (RMBS180615C00014000, $0.10, flat)

Entry Price: $0.50 (5/3/2018)

Exit Target: $1.00

Return: -80%

Stop Target: None

Action: Resistance is at $13.75. Support is at $13.25.

Trading graph