MomentumOptions.com Pre-Market Update for 10/18/2019
Near-Term Resistance Levels Back in Focus
The market rebounded on Thursday following another round of mostly positive 3Q earnings and upbeat comments on the China trade deal. Larry Kudlow, Director of the National Economic Council, said US Trade Representative Robert Lighthizer has been speaking to high-level Democrats about a trade deal with China.
Kudlow also added although there are skeptics, there is a lot of momentum on both sides toward finalizing a trade deal with China. The major indexes once again pushed near-term resistance levels with Tech and the small-caps tapping higher highs for the week.
The Russell 2000 showed the most strength after jumping 1.1% and tapping an intraday high of 1,542. Upper resistance at 1,530-1,345 was challenged but held with the close back above the 200-day moving average being a bullish signal.
The Nasdaq rose 0.4% following the 2nd-half push to 8,183. Prior and lower resistance from mid-September at 8,150-8,200 was cleared and held with a move above the latter keeping mid-July barriers at 8,250-8,300 in play.
The S&P 500 added 0.3% after trading to an morning high of 3,008. Major and lower resistance at 3,000 was cleared bur held with a close above 3,025 and the record peak at 3,027 being an ongoing bullish development with blue-sky territory towards 3,050-3,075.
The Dow nudged up 0.1% with the opening high reaching 27,112. Fresh and lower resistance at 27,200-27,400 easily held with a close above the latter and the all-time high 27,398 getting 27,600-27,800 in focus.
Healthcare and Real Estate were the strongest sectors after rising 0.7% while Communication Services gained 0.6%. Technology was the only sector laggard, despite the higher Nasdaq close, after giving back 0.2%.
In economic news, Jobless Claims rose 4,000 to 214,000 following the previous 10,000 drop to 210,000 the prior week, but below forecasts of 219,000. The 4-week moving average edged up to 214,750 versus 213,750. Continuing claims declined 10,000 to 1,679,000 after rebounding 349,000 to 1,689,000 previously.
Housing Starts stumbled 9.4% to 1,256,000 in September after surging 15.1% to 1,386,000 in August. Expectations were at 1,300,000. Building permits declined 2.7% to 1,387,000 after a revised 8.2% gain to 1,425,000. All of the weakness was in multifamily starts which plunged 28.2% after jumping 41.4% previously. Single family starts edged up 0.3% following the prior 5.1% increase.
Philadelphia Fed Business Outlook Survey for October fell 6.4 points to 5.6, after dropping 4.8 ticks to 12 in September, and a little weaker than forecasts for a print of 7.1. The employment component doubled to 32.9 from 15.8. New orders rose to 26.2 from 24.8. Prices paid dropped to 16.8 from 33.0 while prices received slipped to 16.4 from 20.8. The 6-month outlook jumped to 33.8 from 20.8 with employment at 22.4 from 30.6 and new orders at 39.9 versus 35.2. Prices paid were at 36.2 versus 48.7 and prices received came in at 29.7 from 36.3 on the 6-month forecast.
Industrial Production for September declined 0.4%, weaker than expectations for a dip of 0.2%, and follows the 0.8% rebound in August. This represented the largest monthly decline since April with weaker auto production a major culprit. Capacity utilization fell to 77.5% after rising to 77.9% previously. Manufacturing production slipped 0.5% versus the 0.6% bounce, with motor vehicle and parts production dropping 4.2% from -0.9%. Machinery production declined 1.4% while computer/electronics rose 1%. Utility production was up 1.4% from the prior 0.2% gain. Mining declined 1.3% from the the prior rise of 2.4%
The S&P 500 Volatility Index ($VIX) was up for the 2nd-straight session despite the opening drop to 13.31 and higher market close. Key support at 13.50 was challenged for the 3rd-straight session but held with more important levels of recovery at 13-12.50.
Lower resistance at 14.50-15 held on the intraday pop to 14.18 with a close above the latter being a bearish development.
The Spider S&P 500 ETF (SPY) showed strength for the 2nd time in 3 sessions and 5 of the past 7 after trading to an intraday high of $300.24. Upper resistance at $299.50-$300 was cleared with both levels holding. A close above the latter would be an ongoing bullish signal with fresh hurdles at $302-$302.50 with the mid-September all-time high at $302.63.
Current support is at $298.50-$298. A move below the latter would signal a possible backtest towards $296.50-$296.
RSI remains in a slight uptrend with resistance at 60. A close above this level would signal additional strength towards 65-70 with the latter representing the June and July peak. Support is at 55-50.
I have updated our current positions so let’s go check the tape. I could have additional New Trades, if the bulls can show continued momentum. However, 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: 35-11 (76%). 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.
iShares MSCI Emerging Markets Fund (EEM, $42.20, up $0.16)
EEM November 43 calls (EEM191115C00043000, $0.35, up $0.05)
Entry Price: $0.35 (10/17/2019)
Exit Target: 0.70
Stop Target: None
Action: The iShares MSCI Emerging Markets Fund (EEM) traded to a fresh monthly high of $42.39 while topping the September peak at $42.35. Prior and lower resistance from mid-June at $42.25-$42.50 was cleared but held. A close above the latter would be a very bullish signal for a possible trip towards $43-$43.25 and July resistance levels. The 50-day moving average is back in a nice uptrend after falling below the 200-day moving average in early September.
Current support is at $42.25-$41.75 and the 200-day moving average. A close back below the latter would signal a false breakout with backtest potential towards $41.50-$41.25.
RSI is in an uptrend with resistance at 65-70 and the latter representing the September peak. A close above the latter would signal additional strength towards 75-80 and January 2018 highs. Support is at 60 with a move below this level signaling additional weakness towards 55-50.
AT&T (T, $37.79, down $0.11)
T November 39 calls (T191115C00039000, $0.65, flat)
Entry Price: $0.65 (10/15/2019)
Exit Target: $1.30
Stop Target: None
Action: Lower resistance at $38-$38.25 held with yesterday’s high touching $37.86. Support is at $37.75-$37.50.
Mylan (MYL, $18.88, up $0.14)
MYL November 20 calls (MYL191115C00020000, $0.80, flat)
Entry Price: $0.80 (10/15/2019)
Exit Target: $1.60
Stop Target: None
Action: Thursday’s peak reached $19.06 with lower resistance at $19-$19.25 getting cleared but holding. Support is at $18.75-$18.50.
Limelight Networks (LLNW, $3.75, up $0.63)
LLNW January 3 calls (LLNW200117C00003000, $0.90, up $0.45)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2
Stop Target: 75 cents (Stop Limit)
Action: Set a Stop Limit at 75 cents to start protecting initial profits.
Shares zoomed to a high of $4 yesterday with the options peaking at $1.05. Fresh and lower resistance at $3.75-$4 was cleared and held into the closing bell. New support is at $3.60-$3.50