MomentumOptions.com Pre-Market Update for 9/24/2019

Bears Take Sluggish Session

8:00am (EST)

The market showed some strength on Monday after Chinese officials described trade talks over the weekend as constructive. China’s Commerce Ministry said there were good discussions on detailed arrangements for high level talks in October. 

However, news that the U.S. will be sending troops to the Gulf was a session overhang and caused some opening weakness before the midday turnaround but mostly lower close. Volatility remains slightly elevated but closed below a key level of support to start the week. 

The Dow added 0.1% after making a push 27,011 in the final hour of action. Near-term and lower resistance at 27,000-27,250 was breached but held with the July all-time high at 27,398.

The S&P 500 was lower by a third-point, or 0.01%, despite the late day run to 2,999. It was the 2nd-straight close below the 3,000 level with lower resistance at 3,000-3,025 holding and the all-time peak at 3,027.

The Nasdaq slipped 5 points, or 0.1%, after trading in a 50-point range while testing an intraday high of 8,135. Prior and lower support at 8,150-8,200 was challenged but held with a move above the latter leading to a possible retest towards 8,250-8,300 and the all-time high at 8,339.

The Russell 2000 extended its losing streak to 5-straight sessions after slipping 0.1%, while trading to a late day high of 1,563. Lower resistance at 1,560-1,575 was cleared but held with a above the latter getting 1,585-1,600 back in play.

Consumer Staples, Consumer Discretionary and Real Estate showed the most sector strength after rising 0.4% while Technology was up 0.3%.

Healthcare and Communications Services were the weakest sectors after giving back 0.5% and 0.4%, respectively.

In economic news, Chicago Fed National Activity Index rose 0.51 points to 0.10 in August, topping estimates of 0.06. The 3-month moving average improved slightly to -0.06 from -0.14. Of the 85 indicators that make up the index, 44 made positive contributions.

PMI Composite Flash for September nudged up 0.7 points to 51, topping forecasts of 50.1. The employment component improved to 50.9 from 50.1 previously and is the 2nd-straight monthly gain. The service index edged up to 50.9 from 50.7. The composite improved to 51 from 50.7 previously although employment dropped to 49.9 and is the worst since January 2010. New orders also declined and hit a record low.

In Fed news, New York Fed John Williams said the money markets are being closely monitored and the recent turmoil raises questions on the appropriate level of reserves. He said the Fed is continuing to study what is the right level need for the market and the recent short-term market moves weren’t fully expected, but the Fed was prepared and acted quickly to ease market strains. Williams also suggested the problem was more an uneven distribution of reserves rather than a system liquidity problem.

St. Louis Fed James Bullard said the Committee might opt to ease again, but concurred with Chair Powell’s comments that it’s a meeting-by-meeting decision. He believes the key risk is for slower than expected U.S. growth and doesn’t believe trade uncertainties will go away any time soon. 

Bullard also worries about low inflation and thinks an insurance easing will help re-center inflation. However, he is not seeing an intensification of the yield curve inversion and acknowledged that the policy stance is more accommodative than it was in late 2018.

The iShares 20+ Year Treasury Bond ETF (TLT) had its 5-session winning streak halted despite tapping an intraday high of $143.15. Near-term and lower resistance at $143-$143.50 was breached but held. A close above the $144 level and prior support from earlier in the month would signal continued momentum.

Current support is at $141.50-$141 with additional help at $140-$139.50 and the 50-day moving average.

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The S&P 500 Volatility Index ($VIX) bubbled to a high of 16 shortly after the open with lower resistance at 16.25-16.75 and the 50/200-day moving averages easily holding. A close above the 17.50 level would be a bearish development.

The fade to 14.71 held upper support at 14.50-14 with the close back below the 15 level being a slightly bullish signal. Continued closes below the 13.50 level would be a more bullish signal and confirm another run at all-time market highs.

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The Russell 3000 Index ($RUA) fell for the 4th-straight session despite trading to a 2nd-half high of 1,758. Prior and lower resistance at 1,760-1,775 was nearly cleared but held. Continued closes above the latter would be an ongoing bullish signal with upside potential towards 1,780-1,800 with July’s all-time high just south of 1,781.

Near-term support is at 1,735-1,720 and the 50-day moving average on a move below last week’s low of 1,747 and the 1,745 level.

RSI is flatlining with resistance at 60. Continued closes above this level would signal additional strength towards 65-70 with the latter representing the July and April highs. Support is at 55-50 with a move below the latter reopening weakness towards 45-40.

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The Industrials Select Sector Spider (XLI) extended its losing streak to 7-straight sessions following the opening slide to $77.22. Upper support at $77.50-$77 was split but held. A close below the latter would be an ongoing bearish signal with risk towards at $76.50-$76 and the 50-day moving average.

Lower resistance at $78-$78.50 held on the intraday rebound to $77.94. Continued closes above the latter and prior resistance from July and earlier this month would be a more bullish signal that a near-term bottom has formed.

RSI is trying to level out with support at 55-50. A move below the latter would signal additional weakness towards 45-40 and the latter representing the late August low. Resistance is at 60. Continued closes above this level would signal additional strength towards 65-70 with the later representing the late April peak and a level that failed earlier this month.

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Today’s earnings:

Before the open: AutoZone (AZO), Blackberry (BB), CarMax (KMX), IHS Markit (INFO), Jabil Circuits (JBL), Manchester United (MANU), Neogen (NEOG), Nio (NIO)

After the close: Cintas (CTAS), Comtech Communications (CMTL), IsoRay (ISR), Nike (NKE), Synnex (SNX)

I have updated our current trades, including a Trade Alert for MGM, so let’s go check the tape.

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.

Advanced Micro Devices (AMD, $30.64, up $0.59)

AMD October 32 calls (AMD191018C00032000, $0.80, up $0.10)

Entry Price: $0.80 (9/23/2019)

Exit Target: $1.60

Return: 0%

Stop Target: None

Action: Prior and lower resistance at $30.50-$30.75 was cleared but held on the run to $30.80 yesterday. Support is at $30.25-$30.

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Fox (FOXA, $32.27, flat)

FOXA October 35 calls (FOXA191018C00035000, $0.30, flat)

Entry Price: $0.70 (9/11/2019)

Exit Target: $1.40

Return: -57%

Stop Target: None

Action: Lower resistance at $32.25-$32.50 was challenged but with Monday’s peak reaching $32.49. Support is at $32-$31.75.

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Limelight Networks (LLNW, $3.17, up $0.10)

LLNW January 3 calls (LLNW200117C00003000, $0.55, up $0.05)

Entry Price: $0.60 (9/11/2019)

Exit Target: $1.50-$2

Return: -8%

Stop Target: None

Action: Lower resistance at $3.15-$3.25 was cleared and held on the pop to $3.25 yesterday. Support at $3.10-$3.

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MGM Resorts International (MGM, $28.62, down $0.23)

MGM October 30 calls (MGM191018C00030000, $0.40, down $0.10)

Entry Price: $0.95 (8/13/2019)

Exit Target: $1.90

Return: -58%

Stop Target: 40 cents (Stop Limit)

Action: The Stop Limit at 40 cents tripped on yesterday’s trip to $28.51.

This was a frustrating trade after getting back to even on last week’s surge past $30. However, we can use the premium saved to possibly “rollover” into November of December options if current support holds.

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