MomentumOptions.com Pre-Market Update for 9/13/2019
Bulls Fall Just Shy of All-Time Highs/ Profit Alert (T)
The market continued its assault on prior all-time highs on Thursday after President Trump announced a 2-week delay to the increased tariffs on $250 billion worth of Chinese imports expected on October 1st to the 15th.
The good faith gesture renewed hoped of resolving a more than yearlong international trade dispute and comes ahead of next month’s scheduled meeting at the White House.
The Nasdaq gained 0.3% following the morning run to 8,243. Prior and lower support at 8,250-8,300 was challenged but held with a close above the latter and the all-time high at 8,339 opening up blue-sky territory towards 8,450-8,500.
The S&P 500 was also higher by 0.3% after extending its winning streak to 3-straight sessions while kissing a midday high of 3,020. Major resistance at 3,025 and the late July closing high held with upside potential towards 3,050-3,075 and new all-time highs on a move above 3,028.
The Dow posted its 7-straight win after adding 0.2% and reaching an intraday peak of 27,306. Major resistance at 27,250 was cleared but held with a close above the July all-time high at 27,398 getting 27,500-27,750 in focus.
The Russell 2000 slipped less than a point, or 0.04%, after trading mostly lower throughout the session and stalling at 1,580. Fresh and upper support at 1,570-1,555 was breached but held following the intraday backtest to 1,562 with a move below 1,540 signaling a near-term top.
Materials were the strongest sector after rallying 0.8% while Real Estate and Financials gained 0.6%. Energy was the main sector laggard after falling 0.6% while Healthcare dipped 0.03% to round out the losers.
In economic news, Initial Jobless Claims fell 15,000 to 204,000, lower than forecasts of 215,000, after rising 3,000 to 219,000 the prior week. The 4-week moving average fell to 212,500 versus 216,750. Continuing claims slip 4,000 to 1,670,000 following the 27,000 drop to 1,674,000 previously.
CPI rose 0.1% in August, with the core rate increasing 0.3%, and a little above expectations of 0.2%. There were no revisions to July’s 0.3% gains for both. On a 12-month basis, the headline index slowed to a 1.7% year-over-year pace versus 1.8% and the core rate accelerated to 2.4% versus 2.2%. Energy prices weighed on the headline, dropping 1.9% versus the prior 1.3% rebound, with transportation costs falling 0.6%. Services costs nudged up 0.2% from 0.3% previously. Housing costs rose to 0.4% from 0.3% while food and beverage prices were unchanged. Apparel increased 0.2% from the prior 0.4% gain and medical care rose to 0.7% from 0.5% previously. Education was flat, but personal computer prices rose added another 1.2% after jumping 2.8% previously. Tobacco prices were up to 1.5% from 1%.
The U.S. Treasury Budget came in at a -$200.3 billion deficit for August, as forecast, and a little narrower than the -$214.2 billion shortfall in August 2018. Receipts increased 4% year-over-year, while spending declined 1.1%. For the 11 months of the fiscal year, the deficit stands at -$1.07 trillion versus the -$898.1 billion over the same period last year, with receipts 3.4% higher, and spending up 7%. Analysts are forecasting -$960 billion in red ink for all of fiscal 2019.
Fedspeak has been quiet during this week’s blackout period and ahead of the FOMC minutes next Wednesday. The slide in inflation expectations is a key factor in the FOMC’s policy calculus and it should keep the Fed on course with a rate cut next week. However, with U.S. growth still looking good, and some diminution of trade worries as U.S.-China talks are set to resume next month, the easing should only be a modest adjustment as a quarter-point cut is widely expected.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 4-straight sessions despite tapping an opening high of $141.80. Lower resistance at $141.50-$142 was breached but held for the 2nd-straight session.
The intraday tumble to $139.06 held previous and upper support at $139-$138.50. A close below the latter and the 50-day moving average would be an ongoing bearish signal with risk towards $137.50-$136 and prior breakout levels from early August.
The S&P 500 Volatility Index ($VIX) bubbled to a high of 14.94 shortly after the opening bell with fresh and lower resistance at 15-15.50 holding. There is risk towards 16-16.50 and the 50-day moving average on a close back above these levels.
The midday fade to 13.85 tripped upper support at 14-13.50 but a level that held into the closing bell. A close below the latter ahead of the weekend would be a bullish signal for next week.
The Spider Small-Cap 600 ETF (SLY) extended its wining streak to 4-straight despite a choppy session and intraday pullback to $68.72. Fresh and upper support at $69-$68.50 was breached but held into the closing bell with a move below the latter likely getting $68-$67.50 back in play.
Resistance is at $69.50-$70 with the latter representing the early May and late February highs. Thursday’s late day peak reached $69.68. Continued closes above the $70 level would be an ongoing and very bullish development for a run towards $72-$72.50, with these levels representing prior support from October 2018.
RSI is showing signs of flatlining after clearing resistance at 65. Continued closes above this level would signal additional strength towards 70-75 and February highs. Support is at 60 with a move below this level signaling additional weakness towards 55-50.
The iShares PHLX Semiconductor ETF (SOXX) was up for the 7th-straight session after trading to a fresh 52-week and all-time peak of $221.31. Blue-sky and lower resistance at $221-$221.50 was cleared but held. Continued closes above the latter would be an ongoing bullish signal with additional strength towards $222.50-$223 over the near-term.
Late July and fresh support is at $219-$218.50. Backup help is at $218-$217.50 with a close below the latter signaling a possible near-term top.
RSI remains in an uptrend with resistance at 70. A close above this level would signal additional strength towards 75-80 with the latter representing the July and April highs. Support is at 65-60 with downside risk towards 55-50 on a move below 60.
I have a Profit Alert for AT&T and have adjusted the Stop Limit on MGM. I could have new trades today, depending on the action. If you don’t hear from me by 3:30pm (EST), have a great and safe weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 29-11 (73%). 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.
Fox (FOXA, $33.79, down $0.21)
FOXA October 35 calls (FOXA191018C00035000, $0.65, down $0.05)
Entry Price: $0.70 (9/11/2019)
Exit Target: $1.40
Stop Target: None
Action: Thursday’s low tapped $33.67 with upper support at $33.75-$33.50 getting breached but holding. Lowered resistance is at $34-$34.25.
Limelight Networks (LLNW, $3.30, down $0.06)
LLNW January 3 calls (LLNW200117C00003000, $0.60, flat)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2
Stop Target: None
Action: Support at $3.20-$3.10 held on the backtest to $3.09 yesterday. Resistance is at $3.40-$3.50.
AT&T (T, $38.38, down $0.36)
T October 36 calls (T191018C00036000, $2.60, down $0.30)
Entry Price: $0.65 (8/22/2019)
Exit Target: $4
Stop Target: $2.60 (Stop Limit)
Action: The Stop Limit at $2.60 triggered on the pullback to $37.73 yesterday. While disappointed we couldn’t squeeze more out of this trade, 300% returns in 3 weeks is rare. We will keep, shares on our Watch List for a possible reentry point as we are now 6-0 this year trading call options on AT&T.
Pfizer (PFE, $37.28, down $0.13)
PFE December 37 calls (PFE191220C00037000, $1.80, down $0.05)
Entry Price: $0.85 (8/16/2019)
Exit Target: $2.50
Stop Target: $1.60 (Stop Limit)
Action: Shares traded to a low of $37.06 with upper support at $37.25-$37 holding into the closing bell. Resistance remains at $37.50-$37.75.
MGM Resorts International (MGM, $29.17, up $0.42)
MGM October 30 calls (MGM191018C00030000, $0.65, up $0.10)
Entry Price: $0.95 (8/13/2019)
Exit Target: $1.90
Stop Target: 10 cents, raise to 40 cents (Stop Limit)
Action: Raise the Stop Limit from 10 cents to 40 cents.
Lower resistance at $29-$29.25 was recovered on yesterday’s rebound to $29.26. Support is at $28.75-$28.50 and the 50-day moving average.
Viavi Solutions (VIAV, $14.39, down $0.46)
VIAV September 15 calls (VIAV190920C00015000, $0.20, down $0.30)
Entry Price: $0.65 (7/15/2019)
Exit Target: $1.30 (Limit Order)
Stop Target: None
Action: Fresh support at $14.25-$14 and the 50-day moving average held on the drop to $14.20 yesterday. Lowered resistance is at $14.75-$15.
Cypress Semiconductor (CY, $23.33, up $0.05)
CY September 17 calls (CY190920C00017000, $6.15, up $0.05)
Entry Price: $0.75 (5/16/2019)
Exit Target: $6.75 (Limit Order) (closed half at $1.70 on 5/29)
Stop Target: $5 (Stop Limit)
Action: Continue to hold as shares continue to tap 52-week highs and move towards the takeover deal price.
Infineon (IFNNY) will acquire Cypress for $23.85 per share in cash. Cypress expects to continue its quarterly cash dividend payments until the transaction closes and these options have an intrinsic value of $6.85. We will continue to keep the trade open but have set a Stop Limit in place for protection.