MomentumOptions.com Pre-Market Update for 9/25/2019
Bears Crack Major Support Levels
The market showed showed strength on Tuesday’s on U.S.-China trade optimism following news that China has permitted tariff waivers for U.S. soybean imports. However, calls for the impeachment of President Trump and his dealings with Ukraine sent the major indexes into a tailspin.
A slight rebound resumed after President Trump responded by saying he would declassify the transcript with the Ukraine President. Nervousness remained into the close as Wall Street awaited further details from House speaker Nancy Pelosi on the impeachment process.
The Russell 2000 plummeted 1.6% after testing an intraday low of 1,530. Prior and upper support from early August at 1,530-1,515 and the 50-day moving average was challenged but held with risk towards 1,500-1,485 on a close below 1,515 and the 200-day moving average.
The Nasdaq tanked 1.5% following the late day backtest to 7,969. Prior support from earlier this month at 8,000-7,950 was breached but held with the close below the 50-day moving average and the 8,050 level being a cautious signal.
The S&P 500 fell 0.8% following the 2nd half fade to 2,957. Prior and upper support at 2,975 failed to hold with a move below 2,950 and the 50-day moving average signaling additional weakness.
The Dow lost 0.5% after testing a late day low of 26,704. Near-term and crucial support at 26,800 was breached but held with a close below 26,600 and the 50-day moving average being a bearish development.
Utilities and Consumer Staples were the only sectors that showed strength after rising 1.2% and 0.4%, respectively. Energy and Communications Services were the leading sectors laggards after stumbling 1.6% and 1.5%, respectively.
In economic news, S&P Corelogic Case-Shiller home price index rose 0.13% to 218 in July after rising 0.38% to 217.72 in June. The 12-month pace slowed to 2% year-over-year versus 2.16%. The 10-City index inched up 0.03% to 230.74 following June’s 0.26% gain to 230.68. The annual pace also slipped to a 1.6% year-over-year rate versus 1.86%. Nineteen of the 20 cities surveyed posted annual gains, led by Phoenix (5.77%), while Seattle declined (-0.64%).
FHFA House Price Index increased 0.4% in July to 276.9 after rising 0.2% to 275.8 in June. The index is up 5% year-over-year. All nine regions surveyed posted gains on the month, ranging from 0.1% in the Middle Atlantic to 1.2% in the Mountain. Additionally, the 12-month changes were all positive too, ranging from 3.6% year-over-year in Middle Atlantic to 7.6% in the Mountain.
Consumer Confidence dropped 9.1 points to 125.1, weaker than expectations of 133, after falling 1.6 ticks in August to 134.2. The current conditions index declined to 169 from 176 while the expectations index slid to 95.8 from 106.4. The labor market index declined to 33.2 after jumping to 38.3 previously. The 12-month inflation index slowed to a 4.8% rate from 4.9%.
Richmond Fed Manufacturing Index plunged 10 points to -9 in September after surging 13 points to 1 in August. Expectations were for a print of -1. Weakness was broad based with exceptions in the employment index, which rose 9 points to 3 from -6, with wages rising to 24 from 22. The workweek tumbled to -10 from 4, and new order volume tumbled to -14 from 2, with capex dipping to 7 from 9. Prices paid were little changed at a 2.68% rate from 2.69%, but prices received jumped to a 2.59% pace from 1.66%. The 6-month shipment index dipped to 15 from 18, while the employment and wage components climbed to 16 from 5 for the former, and 56 from 45 for the latter. The 6-month new order volume index fell to 22 from 31, while prices received and paid slowed.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 5th time in 6 sessions after trading to an intraday high of $143.73. Near-term and lower resistance at $143.50-$144 was cleared and held. A close above the latter and prior support from earlier in the month would signal continued momentum towards $145.50-$146.
Rising support is at $143-$142.50.
The S&P 500 Volatility Index ($VIX) zoomed to an intraday high of 17.62. Upper resistance at 16.25-16.75 and the 50/200-day moving averages were breached and failed to hold. A close above the 17.50 level would be an ongoing bearish development with upside risk towards 19.50-20.
New support is at 16-15.50 with a close back below the 15 level signaling some relief. RSI is in an uptrend after clearing resistance at 50 and could push 55-60 over the near-term.
The Spider Small-Cap 600 ETF (SLY) fell for the 5th time in 6 sessions following the 2nd half pullback to $67.29. Prior and upper support from late July at $67.50-$67 was breached and failed to hold. A move below the latter reopens downside risk towards $66.50 and the 50-day moving average.
Lowered resistance is at $68-$68.50. Continued closes back above the latter would be a slightly bullish signal selling pressure has eased.
RSI is in a downtrend with support at 50. A move below the latter would signal additional weakness towards 45-40 and late August lows. Resistance is at 55-60.
The iShares MSCI Emerging Markets Fund (EEM) broke down out of a 6-session trading range following the backtest to $41.17. Upper support at $41.50-$41.25 and the 200-day moving average was breached and failed to hold. A close below the $41 level and the 50-day moving average would be an ongoing bearish development with risk towards $40.50-$40 and prior support from early August.
Lowered resistance is at $41.75-$42. A death cross formed earlier this month with the 50-day moving average falling below the 200-day moving average. This is typically a bearish signal for lower lows.
RSI is in a downtrend with key support at 50 holding. A close below this level would signal additional weakness towards 45-40. Lowered resistance is at 55-60.
Tuesday’s action is signaling lower lows but futures are up as of this writing. Of course, a lot happens before the open on Wall Street and the political drama going on has caused a sideshow. While this can be frustrating as an investor, remember it gives us tremendous trading opportunities.
One troubling signal is the golden cross that is on the verge of forming in the VIX with the 50-day moving average on the verge of clearing the 200-day moving average. This technical setup usually leads to higher highs and would confirm lower lows in the market as the VIX rises.
The good news is the portfolio is extremely light with only 3 open positions. I do have 2-3 possible bearish trades for today, but as we have seen throughout the year, the pullbacks also provide incredible buying opportunities.
The index put options have become expensive following yesterday’s decline so I’m targeting individual stocks that could show continued weakness, no matter what the market does over the next few weeks. Stay locked-and-loaded throughout the session in case I take action.
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, $29.52, down $1.12)
AMD October 32 calls (AMD191018C00032000, $0.60, down $0.20)
Entry Price: $0.80 (9/23/2019)
Exit Target: $1.60
Stop Target: None
Action: Prior and upper support at $29.50-$29.25 was breached but held on yesterday’s tumble to $29.52. Lowered resistance is at $29.75-$30.
Fox (FOXA, $31.59, down $0.68)
FOXA October 35 calls (FOXA191018C00035000, $0.20, down $0.10)
Entry Price: $0.70 (9/11/2019)
Exit Target: $1.40
Stop Target: None
Action: Upper support at $31.50-$31.25 was breached but held following Tuesday’s trip to $31.48. We will likely close the trade if shares fail to hold $31. Lowered resistance at $31.75-$32.
Limelight Networks (LLNW, $3.10, down $0.07)
LLNW January 3 calls (LLNW200117C00003000, $0.55, flat)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2
Stop Target: None
Action: Upper support at $3.10-$3 held on the fade to $3.05 yesterday. Resistance is at $3.15-$3.25.