MomentumOptions.com Pre-Market Update for 11/14/2019
Blue-Chips Tap Fresh All-Time High
The market opened lower to start Wednesday’s session as Wall Street prepared for the public impeachment inquiry proceedings along and comments from Fed Chairman Jerome Powell. There was nothing surprising in Powell’s prepared remarks although the market rebounded off its lows and into positive territory while he was speaking.
Weakness ensued afterwards on reports the U.S./ China trade talks have hit a snag over farm purchases. The mixed close continues to signal near-term and overbought levels for the major indexes with possible consolidation and trading ranges forming.
The Dow added 0.3% after tapping a fresh all-time and intraday high of 27,806. Major resistance at 27,750 was cleared and held with continued closes above this level keeping blue-sky territory towards 28,000 in play.
The S&P 500 added 2 points, or 0.1%, while tapping a midday high of 3,098. Major resistance at 3,100 was challenged but held for the 4th time in 5 sessions with upside potential towards 3,125-3,150 on a close above this level.
The Russell 2000 was down 0.4% after trading in negative territory throughout the session with the low reaching 1,581. Current and upper support at 1,585-1,570 was breached but held.
The Nasdaq was off 4 points, or 0.1%, following the intraday backtest to 8,451. Current and upper support at 8,450-8,400 held by a point with a close below the latter opening up risk towards 8,350-8,300.
Utilities and Real Estate paced sector leaders after rising 1.5% and 1%, respectively. Financials and Materials led sector losers after dropping 0.6% while Energy and Industrials gave back 0.4%.
In economic news, MBA Mortgage Applications surged 9.6% last week, after dipping -0.1% in the prior week. Refinancings paced the gain, climbing 12.9% following a 1.8% gain previously. The purchase index rebounded 5.1% after a -2.5% drop previously. On a 12-month basis, the applications index is at an 83.2% year-over-year rate, with refis at 187.9% year-over-year, while purchases are up 15.1%. The average 30-year fixed rate rose to 4.03% after dipping to 3.98% previously.
Consumer Price Index for October increased 0.4%, and the core rose 0.2%, with the former beating expectations. This follow September’s unchanged print on the headline and 0.1% gain on the core. On a 12-month basis, the headline clip rose to a 1.8% year-over-year pace versus 1.7% in September, though the ex-food and energy component slipped to 2.3% year-over-year from the prior month’s 2.4% rate. Energy prices bounced 2.7% following the prior -1.4% drop. Transportation and medical costs jumped 1% while food/beverage prices were up 0.2% after the prior 0.1% gain. Apparel prices dove -1.8%.
There was nothing new in Fed Chairman Jay Powell’s testimony as he reiterated the economy remains in a good place as long as the economy remains on track. Risk to the financial system remain moderate, he said, but added that the debt load of businesses is historically high.
Powell warned about fiscal policy, and that the Federal budget is on an unsustainable path. He noted the debt is growing faster than the economy (nominally), and that’s unsustainable by definition. He added, even with decent growth and lower rates, there will still be a need to reduce deficits over time.
He said low rates may limit the Fed’s ability to support the economy in another downturn, and that fiscal policy would have to support. On the positive side, he said household consumption has continued to rise solidly, supported by a healthy job market, rising incomes, and favorable levels of consumer confidence. Powell added residential investment has turned up in Q3 thanks to the drop in mortgage rates.
Powell thinks Congress needs to focus on longer run matters, including labor force participation and productivity, which are closely linked to education. Although he sidestepped political questions, on the shale revolution, he said it’s been a miracle, and shutting it down would probably not be a good thing for the economy.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 3rd-straight session following the intraday run to $136.96. New and lower resistance at $137-$137.50 was challenged but held. Continued closes above the $138 level would confirm near-term bottom and be a bullish signal for additional strength towards $139.40-$140 and the 50-day moving average.
Rising support is trying to move up to $136-$135.50.
The S&P 500 Volatility Index ($VIX) stayed elevated throughout the session while testing an intraday high tapping 13.90. Upper resistance at 13-13.50 was breached but held for the 14th-straight session.
The close above 13 was the first in 6 sessions with a close above 13.50 signaling risk towards 14.50-15 and the 50/200-day moving averages. Support remains at 12.50-12.
The Spider Small-Cap 600 ETF (SLY) fell for the 2nd time in 3 sessions following the intraday pullback to $69.37. Fresh and upper support at $69.50-$69 was breached but held with the former representing key resistance from late October and early September.
Current and lowered resistance is at $70-$70.50. A close above the latter and last week’s 52-week high of $70.78 would signal a return of momentum with upside potentials towards $72-$72.50.
RSI is in a downtrend with upper at 55-50 holding. A move below the latter would signal additional weakness towards 45-e0 and early October lows. Resistance is at 60 with a move below this level signaling another possible push towards 65-70.
The Technology Select Sector Spiders (XLK) extended its winning streak to 5-straight sessions with the session high reaching $86.72. Fresh and lower resistance at $86.75-$87.50, along with Tuesday’s the all-time peak at $86.77, was challenged but held. Continued closes above the $87 level would signal a possible run towards $88-$90 over the near-term, depending on momentum.
Current support is at $86-$85.50. A close below the latter would signal a near-term top with additional risk towards $84-$83.50.
RSI remains in an uptrend but slightly overbought after clearing and holding July resistance at 70. Continued closes above this level would signal additional strength towards 75-80 and the latter representing the late April peak. Support is at 65-60 with a close below the latter signaling additional weakness towards 55-50.
Today’s earnings announcements:
Before the open: Altimmune (ALT), Canopy Growth (CGC), Digital Ally (DGLY), Great Elm Capital (GECC), International Game Technology (IGT), LiqTech International (LIQT), Magic Software Enterprises (MGIC), New Age Beverages (NBEV), Opera Limited (OPRA), Rubius Therapeutics (RUBY), Sina (SINA), Tufin (TUFN), Viacom (VIAB), Walmart (WMT), Zealand Pharma (ZEAL)
After the close: Applied Materials (AMAT), CSS Industries (CSS), Dare Bioscience (DARE), Farfetch Limited (FTCH), Globant (GLOB), Inuvo (INUV), Kulicke & Soffa Industries (KLIC), Nvidia (NVDA), Osmotica Pharmaceuticals (OSMT), Repay Holdings (RPAY), SORL Auto Parts (SORL), Tricida (TCDA), Village Farms International (VFF), Wheaton Precious Metals (WPM)
Futures are showing a slightly lower open and some of the trades I’m looking at are starting to setup nicely. I’m still waiting for better entry prices and to see if support levels hold for some of the bullish trades on my Watch List. I also have some put ideas on a few other stocks so stay patient as we wait for the action to come to us.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 41-12 (77%). 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.
Viava Solutions (VIAV, $15.71, up $0.04)
VIAV January 16 calls (VIAV200117C00016000, $0.65, flat)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Upper support at $15.50-$15.25 was breached but held on the backtest to $15.65 yesterday. Resistance remains at $16-$16.25.
Limelight Networks (LLNW, $4.29, down $0.26)
LLNW January 3 calls (LLNW200117C00003000, $1.40, down $0.20)
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: Upper support at $4.30-$4.20 was breached and failed to hold on the pullback to $4.27. Resistance is at $4.50-$4.60.