MomentumOptions.com Pre-Market Update for 9/20/2019
Another Mixed Session for the Market/ Profit Alert (CY)
The market showed strength throughout Thursday’s action but traded in tight ranges as better-than-expected economic news kept a bid under the major indexes. Late day weakness dragged down the blue-chips and the small-caps with the overall market basically flat for the session.
Volatility is giving a neutral reading as the market will now focus on ongoing trades talks between the U.S. and China along with the start of Q3 earnings in early October.
The Nasdaq edged up 0.1% following morning run to 8,237. Prior and lower resistance at 8,200-8,250 was cleared for the 1st time in 4 sessions but a level that held with additional hurdles at 8,300-8,350 and the all-time high at 8,339.
The S&P 500 was up less than a tenth-point after trading in an 18-point range while reaching a 1st half peak of 3,021. Major resistance at 3,025 was challenged but held with continued closes above this level and the all-time high at 3,027 getting 3,050-3,075 in focus.
The Russell 2000 fell 0.4% despite tapping an intraday high 1,581. Previous and key resistance from last week at 1,585 was challenged but held with continued closes above the 1,600 level and the July high of 1,599 being a more bullish signal for higher highs.
The Dow nudged down 0.2% after stalling at 27,272 while holding the 27,000 level for the 7th-straight session and trading in a 208-point range. Near-term and lower resistance at 27,250-27,500 was breached but held with the all-time high from July at 27,398.
Healthcare and Utilities showed the most sector strength after jumping 0.5% while Real Estate rose 0.3%. Industrial and Financials were the leading laggards after giving back 0.5% while Consumer Discretionary and Energy were off 0.3%.
In economic news, Initial Jobless Claims edged up 2,000 to 208,000, versus forecasts of 215,000, after dropping 13,000 to 206,000 in the prior week. This lowered the 4-week moving average to 212,250 from 213,000. Continuing claims declined 13,000 to 1,661,000 after an unchanged 1,674,000 reading the prior week.
Philadelphia Fed Business Outlook Survey fell 4.8 points to 12 in September, a point better than expectations of 11, after dropping 5 points to 16.8 in August. The employment component climbed to 15.8 from 3.6, with the workweek at 13 from 6.8. New orders slid to 24.8 from 25.8. Prices paid jumped to 33 from 12.8, with prices received at 20.8 from 13. The 6-month index declined to 20.8 from 32.6, with the future employment index at 30.6 versus 25, and new orders at 35.2 from 44.1, while prices paid checked in at 48.7 from 39, and prices received at 36.3 from 27.8.
The Current Account balance narrowed to -$128.2 billion after hitting -$136.2 billion in Q1. The balance on goods and services was -$163.3 billion in Q2 versus -$156.5 billion in Q1. The balance on services dipped to $60 billion versus $60.3 billion. The balance on primary income was $67.6 billion versus $56.9 billion. The Q2 current account deficit is 2.4% of GDP, versus 2.6% for Q1. Analysts expect an annual current account deficit of -$528 billion, which would be a new expansion high, versus the prior expansion-high of $491 billion in 2018, but still well below the $806 billion record deficit back in 2006.
Existing Home Sales rose another 1.3% to 5,490,000 in August, topping expectations of 5,380,000, after rebounding 2.5% to 5,420,000 in July. Single family sales increased 1.2% following the prior 2.8% jump, while condo/coop sales climbed 1.7% from an unchanged reading previously. The months’ supply of homes slid to 4.1 from 4.2. The median price fell to $278,200 after falling to $280,400 in July, but is still at a 4.7% year-over-year clip.
Leading Indicators Index for August was unchanged at 112.1, matching forecasts, after rising 0.4% to that level in July. Five of the 10 components made positive contributions, led by building permits (0.22%) and the leading credit index (0.11%). On the negative side, ISM new orders (-0.18%) and stock prices (-0.18%) paced the slide. Nondefense capital goods orders were unchanged.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 4th-straight session after testing an intraday high of $140.82. Prior and lower resistance at $140.50-$141 was cleared but held with additional hurdles at $141.50-$142.
Current and rising support is at $140-$139.50 followed by $139 and the 50-day moving average.
RSI remains in a slight uptrend and is approaching resistance at 50. Continued closes above this level would be a bullish signal for additional strength towards 55-60. Support is at 45-40.
The S&P 500 Volatility Index ($VIX) tested a low of 13.31 shortly after the opening bell with major support 13.50 getting breached but holding. Continued closes below this level would be a bullish signal for the market with downside risk towards 12.50-12 and July lows.
Resistance is at 14.50-15. A move above 15.50 would be a cautious signal with upside risk towards 16.25-16.75 and the 50/200-day moving averages.
The Russell 2000 ETF (IWM) fell for the 3rd-straight session despite trading to an intraday high of $157.82. Lower resistance at $157.50-$158 was cleared but held. Continued closes above the $159 level would be a more bullish signal for a possible retest towards $160-$160.50 and prior peaks from early May.
Current and near-term support is at $155.50-$155. A close below the latter would be a slightly bearish signal with risk towards $154-$153.50.
RSI is back in a downtrend after failing resistance at 65. A close above this level would be a bullish signal for a run towards 70-75 and February highs. Support is at 55-50.
The Materials Select Sector (XLB) extended its winning streak to 3-straight sessions after tapping a midday high of $59.11. Lower resistance at $59-$59.25 was tripped but held. Continued closes above the $59.50 level and late July resistance would be an ongoing bullish signal with upside potential towards $60.50-$61 and the 52-week peak at $61.16.
Near-term support is at $58.75-$58.50 with backup help at $58.25-$58. A close below the latter reopens additional downside risk towards $57.50 and the 50-day moving average.
RSI is flatlining with resistance at 65. A close above this level would signal additional strength towards 70-75 and July/ April highs. Support is at 60-55 with risk to 50 and the monthly lows on a move below the latter.
I was hesitant once again to take new trades yesterday for a couple of reasons. AMD could trade lower so I’m waiting to possibly get in at lower prices. With regular October options expiring in a month, I often consider this a danger zone for trades with less than 4 weeks of premium. However, with 3Q earnings season just around the corner, stocks will likely make more dramatic moves based on company results.
While I don’t like take an earnings trade just on this catalyst, some of our current trades, and new ones, could be affected in the coming weeks. This is why I want to spend the weekend researching the Watch List to see which possible current trades I have ready that could be involved.
On that note, I do have a Profit Alert for Cypress Semiconductor (CY) this morning as the regular September call options expire today. It has been a longer-than-expected holding period following the takeover offer but well worth the 430% return we waited for.
Congratulations on booking and banking these tremendous profits and let’s treat ourselves to something special this weekend. Be safe and I will chat with you Monday morning.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 32-11 (74%). 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, $32.04, down $0.60)
FOXA October 35 calls (FOXA191018C00035000, $0.25, down $0.10)
Entry Price: $0.70 (9/11/2019)
Exit Target: $1.40
Stop Target: None
Action: Fresh and upper support at $32-$31.75 was breached but held following the drop to $31.96 on Thursday. A close below $31.50 would be a renewed bearish signal and likely result in an early exit. Lowered resistance is at $32.25-$32.50.
Earnings are scheduled for the 1st week of November.
Limelight Networks (LLNW, $3.12, down $0.07)
LLNW January 3 calls (LLNW200117C00003000, $0.50, down $0.05)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2
Stop Target: None
Action: Upper support at $3.15-$3.05 held on the fade to $3.11 yesterday. Lowered resistance is at $3.20-$3.30. Earnings are due out on October 16th.
MGM Resorts International (MGM, $29.06, down $0.45)
MGM October 30 calls (MGM191018C00030000, $0.70, down $0.25)
Entry Price: $0.95 (8/13/2019)
Exit Target: $1.90
Stop Target: 40 cents (Stop Limit)
Action: Prior and upper support at $29-$28.75 was breached but held on the backtest to $28.99. Lowered resistance is at $29.25-$29.50.
Earnings are scheduled to be released in late October so this trade will avoid the headline risk. However, I’d like to see shares rally into the news and over the next few weeks.
Cypress Semiconductor (CY, $23.25, down $0.06)
CY September 17 calls (CY190920C00017000, $6.30, down $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: Close the other half of the trade this morning to lock-in profits on our biggest winner of the year – thus far.