MomentumOptions.com Pre-Market Update for 12/2/2019
Bulls Wrap up Solid Month Despite Black Friday Pullback
The market traded lower throughout Friday’s shortened session despite indications of a strong kick-off to the critical holiday selling season for the retail sector. Worries over president Trump’s signing of the Hong Kong Human Rights and Democracy Act of 2019 led to the overall weakness and could be a sticking point to locking up a phase one trade deal.
China responded by saying trade negotiations are still on track as long as the President doesn’t implement any of the law’s measures. The limited action and slight pullback snapped 4-session winning streaks but wrapped up a solid month of November as the major indexes had their best showing since June.
The Russell 2000 fell 0.6% following the intraday backtest to 1,624. Current and upper support at 1,625-1,610 was breached and failed to hold by a half-point with risk towards 1,600-1,585 on a move below the latter.
The Nasdaq gave back 0.5% after trading to a late day low of 8,664. Current and upper support at 8,650-8,600 held with a move below the former signaling risk towards 8,550-8,500.
The S&P 500 was lower by 0.4% with the low reaching 3,139 ahead of the closing bell. Near-term and upper support at 3,125-3,100 easily held with a move below the latter opening up risk towards 3,075-3,050.
The Dow was also down 0.4% following the pullback to 28,042. Near-term and upper support at 28,000-27,800 held with a close below the former getting 27,600-27,400 in focus.
For the week, the Russell 2000 gained 2.3% and Nasdaq jumped 1.7%. The S&P 500 rose 1% and the Dow was up 0.6%. For November, the Nasdaq zoomed 4.5% and the Russell 2000 soared 3.8%. The Dow surged 3.7% and the S&P rallied 3.4%.
Energy was the weakest sector on Friday after falling 1% while Consumer Discretionary was down 0.7%. There was no sector strength.
For the week, the best performing sectors were Consumer Discretionary (2.6%), Healthcare (2.2%) and Communication Services (1.7%). Energy (-1.6%) and Utilities (-0.q%) were the only sector laggards.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after tapping a low of $139.78. Near-term and upper support at $140.50-$140 was breached and failed to hold. A close below the former and the 50-day moving average would be an ongoing bearish signal with downside risk towards $138.50-$138.
Current resistance from late October remains $141-$141.50.
RSI is in a downtrend with support at 55-50. A move below the latter would signal additional weakness towards 45-40. Resistance is at 60 and the November peak.
The S&P 500 Volatility Index ($VIX) stayed elevated throughout Friday’s session with the high taping 12.83. Prior and lower resistance at 13-13.50 held with the close above 12.50 being a slightly bearish signal. Continued closes above this level keeps upside risk towards 14.50-50 and the 50/200-day moving averages in play.
Fresh support is at 12.50-12.
RSI is in an uptrend with resistance at 50. Continued closes above his level would signal additional strength towards 55-60 and early October highs. Support is at 45-40.
The Invesco QQQ Trust (QQQ) had its 4-session winning streak snapped following the pullback to $205. Current and upper support at $205-$204.50 was triggered but held. A close below the latter would signal a possible near-term top with backtest potential towards $202.50-$202.
Resistance is at $205.50-$206. Continued closes above the latter and last Wednesday’s all-time high of $206.05 would be an ongoing bullish signal with upside potential towards $207-$207.50.
RSI has turned south on the close below upper support at 70-65. A close below the latter and the November low opens weakness towards the 60 level and late October support. Resistance is at 75.
The Communication Services Select Sector Spider (XLC) fell for the first time in 6 sessions after trading down to $52.51. Fresh and upper support at $52.50-$52.25 held. A close below the $52 level would be a slightly bearish signal for a further pullback towards $51.75-$51.50.
Near-term resistance is at $52.75-$53. A move above the latter and last week’s all-time high at $52.80 would be a renewed bullish signal for a push towards $53.50-$54, depending on momentum.
RSI has reversed course after failing to hold resistance at 70. Continued closes below this level would be a bearish signal for additional weakness towards 65-60 with the former holding since early November.
The percentage of S&P 500 stocks trading above the 200-day moving average closed at 73.50% on Friday, down 2.19%, with the low reaching 73.30% ahead of the close. Upper support at 72.5%-70% held. A move below the latter and the November low at 68.78% would signal additional weakness towards 67.5%-65%. Resistance is at 75%. A close above this level and last week’s peak at 75.89% would be a renewed bullish signal with upside potential towards 77.5%-80% and January 2018 overbought levels.
The percentage of Nasdaq 100 stocks trading above the 50-day moving average settled at 77%, down 1% with the low tapping 76%. Near-term and upper support at 77.5%-75% was breached and failed to hold. A close below the latter would be signal additional weakness towards 72.5%-70%. Current resistance is at 80% with last week’s high reaching 78% and the early November peak at 78.64%. A close above these overbought levels would be a renewed bullish signal for a push towards 85% and July highs.
Although Friday’s action was an afterthought for most traders, the action in the VIX was a slight concern on the close back above the 12.50. While not alarming, it is signaling additional weakness over the near-term if this level is not recovered by today’s close.
There are a number of key earnings announcements throughout the week that could affect the Tech sector and this Friday’s jobs report could play a big role on how the week wraps up. Continued news on the U.S./ China trade front will be the most important factors influencing price action and we have great indicators in place to let us know when to lighten up on bullish positions and possibly switch to bearish setups.
On that note, I should have New Trades this week but please remember we can only trade what the market gives us. I also want to ensure we have good setups going into 2020 while protecting the phenomenal gains we have made throughout 2019.
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, $38.52, down $0.11)
PFE January 40 calls (PFE200117C00040000, $0.40, down $0.04)
Entry Price: $0.40 (11/25/2019)
Exit Target: $0.80
Stop Target: None
Action: Shares tested a low of $38.51 with upper support at $38.50-$37.25 getting challenged but holding. Resistance is at $38.75-$39 and the 200-day moving average.
Viava Solutions (VIAV, $15.02, down $0.19)
VIAV January 16 calls (VIAV200117C00016000, $0.30, down $0.05)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Shares traded down to $15.02 with upper support at $15-$14.75 and the 50-day moving average holding. Resistance is at $15.25-$15.50.
Limelight Networks (LLNW, $4.27, up $0.01)
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 (Stop Limit)
Action: Friday’s high reached $4.31 with lower resistance at $4.30-$4.40 getting breached but holding. Current support remains at $4.20-$4.10.