MomentumOptions.com Pre-Market Update for 12/4/2019
Bulls Losing Streak Reaches 3-Straight
The market extended its losing streak to 3-straight sessions on Tuesday after President Trump said there is not a deadline for a trade deal with China and that it might be best to wait until after the 2020 election. The comments soured sentiment and led to continued selling pressure from the opening bell with the technical damage that started last Friday worsening for the major indexes.
Additional tariff developments with France and other geopolitical concerns voiced by President Trump kept a lid on the afternoon bounce off the lows. The rebound was slightly bullish although volatility continues to confirm possible near-term selling pressure after trading past and closing above another set of key resistance levels.
The Dow tanked 1% while bottoming at 27,325 shortly after the opening bell. Fresh and upper support at 27,400-27,200 was breached but held with a close below the latter and the 50-day moving average opening up risk towards the 27,000 level.
The S&P 500 sank 0.7% with the session low reaching 3,070. New and upper support at 3,075-3,050 was pierced but held with a move below the latter being an ongoing bearish signal with additional downside potential towards 3,025-3,000 and the 50-day moving average.
The Nasdaq gave back 0.6% after testing an intraday low of 8,435. Near-term and upper support at 8,450-8,400 was tripped but held with a close below the latter getting 8,325-8,275 and the 50-day moving average in play.
The Russell 2000 lost 0.3% following the opening drop to 1,589. Prior and upper support at 1,600-1,585 was breached but held with a close below the former signaling additional weakness towards 1,565-1,550 and the 50-day moving average.
Real Estate and Utilities were the only sectors that showed strength after rising 0.8% and 0.4%, respectively. Energy and Financials led sector laggards after falling 1.5% and 1.4%.
In economic news, Chain store sales sank 5.9% last week, after rising 1.6% in the prior week, with sales slowing to a 2.0% year-over-year pace from 4.5% previously. Adverse weather likely played a big part behind the weekly drop. Additionally, it looks as though some sales were pulled forward, while there was also a tough comparison to last year’s sales. However, sales will likely sharply rebound, if record Black Friday and Cyber Monday sales are indications, along with there being 6 fewer shopping days between Thanksgiving and Christmas than last year.
The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 3 session slide after soaring to an intraday high of $141.77. Prior and lower resistance from mid-September at $141.50-$142 was cleared but held. Continued closes above the former would signal additional strength towards $142.50-$143.
The triple-top breakout from early October above $141 and close back above the 50-day moving average was a bullish development. This level will try to hold as key support on a pullback with backup help at $140.50-$140.
The S&P 500 Volatility Index ($VIX) was up for the 4th-straight session after zooming to a high of 17.99 shortly after the opening bell. Prior and upper resistance from late September at 17-17.50 was breached but held. A close above the latter keeps upside risk towards 19.50-20 in play.
New support is at 15.50-15 and the 200-day moving average. Continued closes below the former would signal a possible near-term top and would be a slightly bullish signal for the market.
The S&P 400 Mid Cap Index ($MID) extended its losing streak to 3-straight sessions after testing a low of 1,969. Prior and upper support from late October at 1,980-1,970 was breached but held. A close below the latter would signal continued weakness with a further backtest towards 1,960-1,950 and the 50-day moving average.
Lowered resistance is at 1,990-2,000. Continued closes above the former would signal a possible near-term bottom and would be a be a bullish signal retest towards 2,010-2,030 and fresh 52-week peaks.
RSI remains in a downtrend after failing to hold key support at 50 and a level that has been holding since mid-October. Continued closes below 50 keeps weakness towards 45-40 in play. Resistance is at 55-60.
The Materials Select Sector (XLB) was also down for the 3rd-straight session following the pullback to $58.62. Near-term and upper support at $58.75-$58.50 was tripped but held. A close below the latter and the 50-day moving average reopens downside risk towards $58-$57.50 and late October lows.
New and lowered resistance is at $59.25-$59.50 on the close just above $59 and a previous triple-top hurdle from July. Continued closes above $59.50 would be a renewed bullish signal with upside potential towards $60.50-$61 and resistance levels from last month and September 2018.
RSI is in a downtrend with support at 45-40. A move below the latter would signal additional weakness towards 35-30 and lower levels from October and August. Resistance is at 50.
Today’s earnings include:
Before the open: AstroNova (ALOT), Campbell Soup (CPB), G-III Apparel Group (GIII), Royal Bank of Canada (RY)
After the close: At Home Group (HOME), Descartes Systems Group (DSGX), Elastic (ESTC), Five Below (FIVE), Greif (GEF), H&R Block (HRB), Powell Industries (POWL), RH (RH), Semtech (SMTC), Slack Technologies (WORK),
Smartsheet (SMAR), Synopsys (SNPS), Tilly’s (TLYS), Verint Systems (VRNT)
I have updated our current trades so let’s go check the tape.
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, $38.05, down $0.24)
PFE January 40 calls (PFE200117C00040000, $0.30, down $0.05)
Entry Price: $0.40 (11/25/2019)
Exit Target: $0.80
Stop Target: None
Action: Upper support at $38.25-$38 failed to hold on the pullback to $37.84 yesterday. Resistance is at $38.50-$38.75.
Viava Solutions (VIAV, $14.58, down $0.05)
VIAV January 16 calls (VIAV200117C00016000, $0.20, flat)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Shares traded down to $14.32 with upper support at $14.50-$14.25 getting breached but holding. Resistance remains at $14.75-$15 and the 50-day moving average.
Limelight Networks (LLNW, $4.19, down $0.05)
LLNW January 3 calls (LLNW200117C00003000, $1.20, down $0.05)
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: Tuesday’s low tapped $4.15 with upper support at $4.20-$4.10 getting breached but failing to hold by a penny. Lowered resistance is at $4.25-$4.35.