MomentumOptions.com Pre-Market Update for 10/8/2019
Bears Return Despite Positive Trade Chatter
The market was sluggish throughout Monday’s first half of action as Wall Street awaited developments from trade talks with China on Thursday and the light start to the 3Q earnings season. The major indexes turned positive midday following comments by White House economic advisor Larry Kudlow who said the U.S would be open to anything China brings to the table, including a short-term deal.
More enthusiasm came later in the day after the Chinese Commerce Ministry confirmed China is ready to do a deal on the parts of the negotiations both sides agree upon with a timetable for the harder issues to be worked out next year. Despite the positive news, the major indexes settled lower after pushing prior resistance levels with volatility settling back above a key level of support.
The S&P 500 fell 0.5% after trading in a 24-point range and testing an morning low of 2,935. Upper support at 2,950-2,925 failed to hold with the close back below the 50-day moving average being a cautious signal.
The Dow was down 0.4% following the morning backtest to 26,424. Fresh and upper support at 26,400-26,200 held with the close back below the 50-day moving average also being a slightly bearish signal.
The Nasdaq was lower by 0.3% despite testing an intraday high of 8,013. Lower resistance at 8,000-8,050 and the 50-day moving average was cleared but held for the 2nd-straight session.
The Russell 2000 slipped 0.2% after testing a 2nd half high of 1,507 but failing to hold the 1,500 level into the closing bell. Near-term and lower resistance at 1,510-1,525 was challenged but held with a close above the latter and the 50/200-day moving averages being more bullish developments.
There was no sector strength with Communication Services closing flat for the session. Energy and Consumer Staples led sector weakness after giving back 0.9% and 0.8%, respectively, while Industrials and Finance declined 0.5%.
In economic news, Consumer Credit was at $17.9 billion for August following July’s unexpected $23 billion surge. Non-revolving credit jumped to $19.8 billion from $12.7 billion while revolving credit fell -$1.9 billion to $7.5 billion after rising to $9.4 billion in July.
Baker Hughes announced the international rig count for September was at 1,131, down 7 from the 1,138 in August, and up 127 from 1,004 in September 2018. The international offshore rig count for September came in at 242, down 2 from the 244 counted in August, and up 38 from 204 in September 2018. The average U.S. rig count for September was at 878, down 48 from the 926 in August, and down 175 from 1,053 in September 2018.
The iShares 20+ Year Treasury Bond ETF (TLT) had its 7-session winning streak snapped following the intraday pullback to $144.71. Fresh and upper support at $145-$144.50 was breached and failed to hold with a close below the $144 level signaling a possible near-term top.
Resistance from mid-August remains at $146-$146.50.
The S&P 500 Volatility Index ($VIX) bubbled to a high of 18.52 shortly after the opening bell with lower resistance at 18.50-19 getting breached but holding.
The midday fade to 16.44 cleared lower support at 17-16.50 with the 200-day moving average holding by a smidge. The close back above 17.50 and the 50-day moving average was a slightly bearish signal.
The Spiders Dow Jones Industrial Average ETF (DIA) had its 2-session winning streak snapped following the morning pullback to $264.19. Upper support at $264.50-$264 and the 50-day moving average was breached but held. A close below the latter would be a renewed bearish signal with risk towards $262.50-$262.
Resistance is at $266-$266.50. Continued closes above $268 would be a more bullish signal near-term selling pressure has abated.
RSI is in a slight downtrend with support at 45-40. A move below the latter would be a bearish signal for a retest towards 35-30 and the August lows. Resistance is at 50 with a close above this level signaling additional strength towards 55-60.
The iShares PHLX Semiconductor ETF (SOXX) was also lower for the first time in 3 sessions after testing a late day low of $212.13. Current and upper support at $212-$211.50 as challenged but held with backup help at $210.50-$210 on a move below the latter. A close below the $210 level would signal a false breakout from last week.
Resistance is at $214.50-$215. Continued closes above the latter would be a renewed bullish signal with additional strength towards $216-$216.50.
RSI is in a slight downtrend with support at 50. A move below this level reopens weakness towards 45-40 with the latter representing the monthly low. Resistance is at 55-60.
I have updated our current trades so let’s go check the tape. I could have additional New Trades at some point today, depending on market action, so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 33-11 (75%). 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.
Intel (INTC, $51.04, up $0.12)
INTC November 52.50 calls (INTC191115C00052500, $1.20, down $0.11)
Entry Price: $1.32 (10/7/2019)
Exit Target: $2.65
Stop Target: 65 cents (Stop Limit)
Action: Set an Exit Target at $2.65. Set a Stop Limit at 65 cents. Earnings are due on October 24th.
Shares tested a high of $51.23 with lower resistance at $51-$51.25 holding. Support is at $50.50-$50 with the opening low tapping $50.56.
Ford (F, $8.68, down $0.06)
F November 9 puts (F191115P00009000, $0.70, flat)
Entry Price: $0.40 (10/1/2019)
Exit Target: $1
Stop Target: 55 cents (Stop Limit)
Action: Monday’s low reached $8.61 with upper support at $8.60-$8.50 getting challenged but holding. Resistance remains at $8.80-$8.90. A death-cross remains in play with 50-day moving average on track to fall below the 200-day moving average.
Limelight Networks (LLNW, $2.96, up $0.04)
LLNW January 3 calls (LLNW200117C00003000, $0.40, flat)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2
Stop Target: None
Action: Monday’s peak reached $2.98 with lower resistance at $3-$3.05 holding. Rising support is at $2.80-$2.75 and the 200-day moving average.