Pre-Market Update for 1/10/2019

Bulls Continue to Climb Wall of Worry

8:00am (EST)

The market showed continued momentum following the 4th-straight session of higher highs. News that U.S. and China trade talks resumed for a 3rd-straight day that were unscheduled, but have now ended, are hinting real progress is being made. 

The strength came despite fresh concerns over the U.S. debt ceiling and possible credit downgrade and ahead of the FOMC minutes. The reaction afterwards was well received as the major indexes held their gains into the closing bell

The Nasdaq showed the most strength after rising 0.9% and trading to a high of 6,985. Fresh and lower resistance at 6,950-7,000 was cleared and held with a move above the latter and the 50-day moving average being a continuing bullish signal.

The Russell 2000 also rallied nearly 0.9% after closing less than 4 points off its session high of 1,442. New and lower resistance at 1,435-1,450 was split and held with a move above the latter and the 50-day moving average also leading to higher highs.

The S&P 500 added 0.4% following the intraday run to 2,595. Upper resistance at 2,575-2,600 was challenged but held with more important hurdles at 2,625-2,650 and the 50-day moving average.

The Dow was also up 0.4% after reaching a peak of 23,985 ahead of the Fed news. Upper resistance at 23,800-24,000 was nearly cleared with a close above this level keeping 24,250-24,500 and the 50-day moving average in play.

Energy and Technology led sector strength after jumping 1.4% and 1%, respectively. Industrials and Consumer Discretionary advanced 0.5% and 0.3%.

Consumer Staples paced sector laggards after giving back 1.1%. Utilities were down 0.8% and Real Estate declined 0.5%.

The S&P 500 Volatility Index ($VIX) fell for the 9th time in the past 10 sessions despite a quick spike to 22.03 shortly after the open. Resistance at 22-22.50 held for the 3rd-straight session with a move above 23 being a warning sign to tap the bullish breaks.

The low reached to 19.77 after the Fed minutes and represented the 8th-straight lower low. Fresh and early December support at 20-19.50 was split on the close below the former with a move below the latter signaling additional market strength. 

Historically, the VIX tends to hover around the 20 level so continued closes below this level would be a slightly bullish signal ahead of the flood of 4Q earnings coming over the next few weeks.

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The Russell 3000 Index ($RUA) closed higher for the 4th-straight session, and 6th time in the past 7, after making an intraday run to 1,529.

Fresh and major resistance at 1,525 was cleared but held by less than a half-point. Continued closes above this level would be a green light for higher highs and a possible run towards 1,545-1,560 and the 50-day moving average.

Rising support is at 1,515-1,500. A close below 1,485 over the near-term would be a bearish development and signal a possible near-term top. (If this would occur IWM put options can be targeted).

RSI has been in a nice uptrend since late December, aside from the hiccup from late last week, with resistance at 55. A move above this level would signal additional strength towards 65-70 and September and August peaks. Support is at 50.

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Communication Services (XLC) closed higher for the 4th-straight session after reaching an intraday peak of $44.29 while closing above the 50-day moving average for the 2nd-straight session.

Near-term resistance is at $44.25-$44.50 was cleared but held. Continued closes back above the latter, and a level that briefly served as early October support, would be a bullish signal for a possible push towards $46-$46.50 and the 200-day moving average.

Rising support at $44-$43.75 with a move below the latter signaling a possible weakness towards $42-$41.50.

The index remains relatively new as it nears its 7th month of trading and has made a nice bounce off the late December double-bottom at the $39 level. The lows on back-to-back sessions tapped $38.97 and $39.04. The double-digit gain has been impressive but could pause once early November highs come into play.

RSI has been showing strength since late December after clearing multi-month resistance at 50 that had lasted since October. This level will now try and serve as near-term support on weakness. Fresh hurdles are at 65-70 on continued momentum with the latter representing the July peak.

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The 4-day rally and overall January pop will reach a crucial point once and if the 50-day moving averages are cleared. All signs are pointing towards continued market momentum and a run towards the w00-day MA’s. Additionally, another positive Friday and Monday close would be a bullish development as it would mean money is moving off the sidelines and back into the market.

I have set a Stop Limit for NBEV following yesterday’s monster move and I would like to add another trade or two if the VIX can hold 20 again today. For now, let’s go check on the action.

Momentum Options Play List

Closed Momentum Options Trades for 2019: 0-0 (0%). 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 “Stops” entered to close any trades or “Limit 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.

Energy Select Spiders (XLE, $62.20, up $0.97)

XLE February 64 calls (XLE190215C00064000, $1.20, up $0.15)

Entry Price: $1.15 (1/8/2019)

Exit Target: $2.30

Return: 4%

Stop Target: None

Action: Fresh and lower resistance at $62.50-$63 was challenged but held with yesterday’s peak reaching $62.41. Rising support is at $61.50-$61.

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CVS Health (CVS, $66.04, down $2.49)

CVS February 72.50 calls (CVS190215C00072500, $0.40, down $0.55)

Entry Price: $1.20 (1/8/2019)

Exit Target: $2.40

Return: -67%

Stop Target: None

Action: Yesterday’s low tapped $65.31 with support at $65.50-$65 holding. A close below $64 would be a slightly bearish development. Lowered resistance is at $67-$67.50.

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New Age Beverages (NBEV, $6.10, up $0.59)

NBEV February 6 calls (NBEV190215C00006000, $0.75, up $0.15)

Entry Price: $0.50 (1/7/2019)

Exit Target: $1.00

Return: 50%

Stop Target: 55 cents (Stop Limit)

Action: Set an initial Stop Limit at 55 cents to start protecting profits. 

Shares zoomed to a high of $6.16 on Wednesday with fresh and lower resistance at $6-$6.25 holding. Rising support is at $5.75-$5.50.

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Consumer Staples Select Spiders (XLP, $51.18, down $0.48)

XLP February 53 calls (XLP190215C00053000, $0.40, down $0.15)

Entry Price: $0.52 (1/7/2019)

Exit Target: $1.05

Return: -23%

Stop Target: None

Action: Support at $51-$50.50 held on Wednesday’s pullback to $51.06. Resistance remains at $51.50-$52.

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Imax (IMAX, $19.50, down $0.50)

IMAX February 18 puts (IMAX190215P00018000, $0.40, up $0.10)

Entry Price: $0.60 (1/3/2019)

Exit Target: $1.20

Return: -33%

Stop Target: None

Action: Prior support at $19.50-$19.25 is back in play following the pullback to $19.48. Lowered resistance is at $19.75-$20.

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