MomentumOptions.com Pre-Market Update for 11/29/2019
Bulls Stay Strong as Momentum Carries On
The market set another round of record highs on Wednesday after President Trump said that the U.S. and China were in the the final throes of hammering out a phase 1 trade deal. The rhetoric continues to reaffirm a deal may be announced in the near-term, however, the next phases are expected to be much more difficult.
Upbeat economic news also helped sentiment as GDP and employment numbers came in better than expected. The extended gains helped keep the major indexes on track for their best month since June with volatility still signaling a relaxed trading environment.
The Nasdaq jumped 0.7% while closing at an all-time and session high of 8,705. Fresh and lower resistance at 8,700-8,750 was cleared and held with a close above the latter getting 8,800-8,850 in focus.
The Russell 2000 rallied 0.6% on the closing high of 1,634 and fresh 52-week peak. Lower resistance at 1,625-1,640 was cleared and held to keep upside potential towards 1,650-1,665 in play.
The S&P 500 added 0.4% after testing a late day record peak of 3,154. Key resistance at 3,150 was cleared and held with fresh hurdles now at 3,175-3,200.
The Dow was higher by 0.2% with the record high reaching 28,174 ahead of the closing bell. Near-term and lower resistance at 28,200-28,400 was challenged but held with momentum towards 28,600-28,800 on closes above the latter levels.
Consumer Discretionary paced sector strength with a gain of 0.9% while Technology and Healthcare added 0.5%. Industrials were the only sector laggard after giving back 0.2%.
In economic news, MBA Mortgage Applications rebounded 1.5%, after dropping -2.2% in the prior week. Refinancings continued to drive applications, rising 4.2% following the prior -7.7% drop and comprising 62% of applications. The purchase index declined 1.2% after a prior gain of 6.7%. On a 12-month basis, mortgage applications are up 152.9% year-over-year, largely reflelcting the positive effects of lower mortgage rates. Refinancings are up 313.9% year-over-year, while purchase applications are at a 54.8% pace. The 30-year fixed mortgage rate dipped to 3.97% from 3.99% previously, and is down from a 5.12% rate a year ago.
Durable Goods Orders rose 0.6% in October, easily topping estimates of 0.2%, and follows September’s -1.4% decline. Transportation orders rose 0.7% after tumbling -3.2% previously. Excluding transportation, orders edged up 0.6% from -0.4%. Nondefense capital goods orders excluding aircraft surged 1.2% from -0.5% previously. Shipments were unchanged after falling -0.7% in September. Nondefense capital goods shipments excluding aircraft rose 0.8%, erasing the prior -0.8% pullback. Inventories were up 0.3% after the prior 0.5% gain. The inventory-sales ratio edged up to 1.72 from 1.71.
GDP was bumped up to 2.1% in the second reading, better than expectations of 1.9% from the Advance report. Growth was at a 2% rate in Q2 and 3.1% in Q1. Personal consumption remained solid, but unchanged at the prior 2.9% pace from the Advance data, while fixed investment was nudged up from -1.3% previously to -1%. Intellectual property was revised down to a 5.1% rate from 6.6% while government was revised down to 1.6% from 2%. Inventories added $10.4 billion to growth after subtracting -$0.4 billion in the Advance release. Net exports subtracted -$7.6 billion versus -$5.7 billion previously. The chain price index was revised up to 1.8% versus 1.7%, but it was at 2.4% in Q2, with the core rate slipping to 2.1% versus 2.2%, and was at 1.9% in Q2.
Initial Jobless Claims fell 15,000 to 213,000 versus forecasts of 218,000. This left the 4-week moving average at 219,750 from 221,250 previously. Continuing claims fell 57,000 to 1,640,000 following the prior 3,000 increase to 1,697,000.
Personal Income for October was flat, with spending up 0.3%. There were no revisions to September’s respective gains of 0.3% and 0.2%. Compensation increased 0.4% versus the prior 0.1% gain in September. Wages and salaries were also up 0.4%, from a revised 0.1% gain. Disposable income dipped -0.1% versus 0.3% previously. The savings rate dropped to 7.8% from 8.1%. Real personal spending edged up 0.1% from 0.2%. The PCE chain price index rose 0.2% from unchanged, with the core rate up 0.1% from unchanged. The 12-month headline rate was steady at 1.3% year-over-year, while the core rates slipped to 1.6% year-over-year versus 1.7%.
Pending Home Sales Index fell -1.7% to 106.7 in October following September’s 1.4% gain to 108.6. The index is up from 102.2 last October, and is up 3.9% year-over-year versus 6.3% in September.
Chicago PMI bounced 3.1 points to 46.3 in November, versus forecasts for a print of 46, while erasing the -3.9 point drop 43.2 in October. The 3-month moving average dipped to 45.5 from 46.9.
The Fed’s Beige Book summary said the economy continued to expand modestly, with manufacturing picking up, while the labor market remained tight. Consumer spending was stable to growing moderate and the picture on nonfinancial services remained quite positive. The report also noted employment continued to rise slightly overall, even as labor markets remained tight, and the vast majority of Districts continued to note difficulty hiring driven by a lack of qualified applicants.
On wages, the report said growth was moderate but pressures intensified for low-skilled positions while prices rose at a moderate pace. Other details included flat to mostly firmer home sales, while residential construction experienced more widespread growth compared to the prior report.
Baker-Hughes Rig Count reports the U.S. rig count is down 1 rig from last week to 802, with oil rigs down 3 to 668, gas rigs up 2 to 131, and miscellaneous rigs unchanged at 3.
The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 4 sessions following the intraday backtest to $140.42. Current and upper support at $140.50-$140 was breached but held. A close below the latter and the 50-day moving average would be a slightly bearish signal with downside risk towards $138.50-$138.
Near-term resistance from late October remains $141-$141.50.
The S&P 500 Volatility Index ($VIX) traded in a tight range with the high reaching 11.79 ahead of the closing bell. Lower resistance at 12-12.50 easily held with upside risk towards 13-13.50 on a move above the former.
Upper support at 11.50-11 was breached but held for the 2nd-straight session on the intraday fade to 11.44.
The Wilshire 5000 Composite Index ($WLSH) extended its winning streak to 4-straight sessions after trading to an all-time intraday high of 32,171. Unchartered and lower resistance at 32,200-32,400 was challenged but held.
Current and key support is at 32,000. A close below this level would signal additional weakness towards 31,800-31,600.
RSI remains in an uptrend after clearing lower resistance at 75-80 and severely overbought levels from January 2018. Support is at 70 with weakness towards 65-60 on a move below this level.
The Energy Select Sector Spider (XLE) extended it flip flopping action for the 4th-straight session after trading to an intraday high of $59.61. Near-term and lower resistance at $59.50-$60 was cleared but held by a penny. A close above the $60.50 would be a more bullish signal for a retest towards $61-$61.50 and the 200-day moving average.
Current and key support is at $59 and the 50-day moving average. A close below this level would be an ongoing bearish signal with backtest potential towards $58.50-$58.
RSI has flatlined and is holding support at 50. A close below this level would be a bearish signal for additional weakness towards 45-40. Resistance is at 55-60.
Today’s shortened session will likely be an afterthought with most traders out shopping for Black Friday or taking the day off. I could have a New Trade today so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 44-12 (79%). 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.
Pfizer (PFE, $38.63, up $0.34)
PFE January 40 calls (PFE200117C00040000, $0.44, up $0.10)
Entry Price: $0.40 (11/25/2019)
Exit Target: $0.80
Stop Target: None
Action: Shares tested a high of $38.71 on Wednesday with near-term and lower resistance at $38.75-$39 getting challenged. Support is at $38.50-$37.25.
Viava Solutions (VIAV, $15.21, up $0.04)
VIAV January 16 calls (VIAV200117C00016000, $0.35, flat)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Shares traded up to $15.31 with lower resistance at $15.25-$15.50 getting cleared but holding. Support is at $15-$14.75 and the 50-day moving average.
Limelight Networks (LLNW, $4.26, up $0.03)
LLNW January 3 calls (LLNW200117C00003000, $1.30, flat)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)
Stop Target: $1.20, lower to $1 (Stop Limit)
Action: Wednesday’s peak reached $4.31 with lower resistance at $4.30-$4.40 getting tripped but holding. Current support remains at $4.20-$4.10.