MomentumOptions.com Pre-Market Update for 11/6/2019
Dow, Nasdaq Stay Hot
The market showed strength on Tuesday’s open following another round of upbeat trade news with China. Reports that the Trump Administration is considering rolling back additional tariffs, one of the Chinese demands for the deal, lifted the Dow and the Nasdaq hitting fresh all-time highs shortly after the open.
Momentum faded afterwards following mixed economic data with Tech and S&P 500 slipping into the red before a mostly higher close. Volatility traded in a tight range before settling slightly higher but is still at a bullish level for the market.
The Russell 2000 rose 0.1% following the intraday push to 1,608. Major and lower resistance at 1,600-1,615 was cleared and held for the first time since early May with a close above the latter and the 52-week high at 1,618 getting 1,625-1,640 in focus.
The Dow also added 0.1% after testing an all-time intraday high of 27,560. Fresh and lower resistance at 27,500-27,750 was cleared but held for the 2nd-straight session with a move above the latter signaling momentum towards the 28,000 level.
The Nasdaq nudged up a point, or 0.02%, while trading to an intraday record high of 8,457. Fresh and lower resistance at 8,450-8,500 was cleared but held for the 2nd-straight session with additional strength towards 8,600-8,650 on a close above the latter.
The S&P 500 slipped 0.1% despite tapping a high of 3,083 shortly after the opening bell. Fresh and lower resistance at 3,100-3,125 was challenged but held with a close above the latter leading to a possible run towards 3,150-3,175.
Financials and Consumer Staples showed the most sector strength after 0.4% and 0.3%, respectively. Real Estate was the biggest sector laggard after sinking 1.7% while Utilities and Healthcare fell 1% and 0.7%, respectively.
In economic news, International Trade in Goods deficit narrowed -4.7% to -$52.5 billion in September, close to expectations, after widening 1.9% to a revised -$55 billion shortfall in August. Total goods and services exports dropped -0.9% after August’s 0.2% increase, while imports declined -1.7% from the prior month’s 0.5% gain. The “real” goods trade deficit flattened to -$82.6 billion versus August’s -$85.8 billion, with exports declining -1% and imports down -2%, after respective gains of 1.1% and 0.9%. The trade deficit with China was -$31.6 billion versus August’s -$31.8 billion, with Canada’s balance at -$2.5 billion versus -$1.4 billion.
PMI Services Index for October fell to 50.6 from 50.9 in September, below estimates of 51. The employment component dropped to 47.5 from September’s 48.6. The final composite index fell to 50.9 versus September’s reading of 51.
JOLTS report showed job openings dropped 277,000 to 7,024,000 in September, matching expectations, after rising 127,000 in August to a revised 7,305,000. The JOLTS rate fell to 4.4% from 4.6%. Hirings were up 50,000 to 5,934,000 following the -94,000 decline to 5,884,00, with the rate steady at 3.9%. Quitters slid -103,000 to 3,498,000, extending the -67,000 decline to 3,601,000. The quit rate dipped to 2.3% from 2.4%.
ISM Non-Manufacturing Index rebounded 2.1 points to 54.7 in October, versus forecasts for a print of 53.5, while recouping much of the -3.8 decline to 52.6 in September. The employment component rose to 53.7 after sliding -2.7 points to 50.4 previously, another indication of the strong labor market. New orders rallied to 55.6 following the -6.6 September drop to 53.7. New export orders fell to 50 following the 1.5 point rise to 52 previously. The prices paid index slipped to 56.6 rising 1.8 ticks to 60 in the prior month
In Fed news, Richmond Fed Thomas Barkin said the economy is healthy and the recession risk is low while adding the rate cuts reflected uncertainties over the outlook. Risks are still tilted to the downside, however, and he said he is closely monitoring conditions to see if the FOMC’s recent insurance purchases are having their desired effects.
Barkin added firms are frustrated with political polarization and there is a high degree of uncertainty about the outlook for government policies. He noted that uncertainties can dampen the effectiveness of the Fed’s easings, and result in less bang for the buck.
Dallas Fed Robert Kaplan is feeling better with a more normally shaped yield curve, and sees it as a sign that the Fed now has policy in the right place.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 3-straight sessions following the intraday pullback to $136.73. Prior and lower support at $137.50-$137 was breached but held. A close below the latter and the late October low at $136.99 would signal fresh risk towards $136.50-$136 and mid-September levels.
Lowered resistance is $137.50-$138.
The S&P 500 Volatility Index ($VIX) was up for the 2nd-straight session after tapping a high of 13.28 shortly after the open. Lower resistance at 13-13.50 was breached and failed to hold. A close above the latter being a slightly cautious signal for the market with risk towards 14.50-15.
Support remains at 12.50-12 and was split with yesterday’s low at 12.25. Continued closed below the latter would confirm another leg higher for the major indexes.
The Spiders Dow Jones Industrial Average ETF (DIA) was up for the 3rd-straight session and 7 of the past 8 with Tuesday’s fresh all-time high reaching $275.51. Blue-sky and lower resistance at $275.50-$276 was cleared but held with a close above the latter signaling additional momentum towards $277-$277.50.
Near-term support is at $274-$273.50. A close below the latter would signal a possible backtest towards $272-$271.50.
RSI is showing signs of leveling out with early July resistance at 70. A close above this level would signal additional strength towards 75-80 but overbought levels. Support is at 65-60. A move below the latter would be a slightly bearish signal for a retest towards 55-50.
The Utilities Select Spider (XLU) extended its losing streak to 3-straight sessions following the intraday pullback to $62.45. Major support at $63, and a level that has been holding since mid-October, was breached and failed to hold. A close below the $62.50 level would be an ongoing bearish signal with downside risk towards $62-$61.50 and mid-September lows.
Key resistance is at $63.50 and the 50-day moving average. A close back above this level would be a slightly bullish signal selling pressure has abated.
RSI remains in a downtrend after closing below key support at 40. This opens up additional weakness towards 35-30 with the latter representing the December 2018 low. Resistance is at 45-50.
I have updated our latest trade, TIVO, and I’m looking to get into 1-2 more new trades, hopefully as early as today.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 40-11 (78%). 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.
Tivo (TIVO, $8.74, up $0.43)
TIVO January 9 calls (TIVO200117C00009000, $0.65, up $0.20)
Entry Price: $0.50 (11/5/2019)
Exit Target: $1.00
Stop Target: None
Action: The options opened at 49 cents and tested a low of 45 cents so we got great fills. I usually don’t encourage buying on the open but I like the action shares have been showing.
TIVO zoomed to an intraday high of $8.75 with major resistance at $8.60 getting cleared and holding. Continued closes above this level keeps $8.80-$9 in play. Support is at $8.50-$8.40 on a move back below $8.60.
While I took this trade on Monday’s technical breakout above the 200-day moving average, there is risk to this trade with earnings out on Thursday. The company topped estimates the past quarter by 15 cents after missing the previous 3 quarters by 3 cents, twice, and 2 cents.
Limelight Networks (LLNW, $4.22, down $0.17)
LLNW January 3 calls (LLNW200117C00003000, $1.30, down $0.10)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)
Stop Target: $1.10 (Stop Limit)
Action: Support at $4.20-$4.10 held on the pullback to $4.17. Resistance remains at $4.40-$4.50.