MomentumOptions.com Pre-Market Update for 12/11/2019
Market Settles Slightly Lower on Trade Headlines
The market was choppy throughout Tuesday’s session following a number of crosscurrents, including trade headlines that U.S. and Chinese trade negotiators are laying the groundwork for a delay of tariffs. Additionally, a USMCA deal was announced with a completed deal expected to be signed in Mexico.
In other political news, House Democrats announced that they will vote this week on whether to impeach President Trump on two articles – abuse of power and obstruction of Congress. The bevy of headlines led to a mixed finish for the major indexes with volatility settling a neutral reading.
The Dow dipped 0.1% after trading to an intraday low of 27,804. Current and key support at 27,800 was challenged but held with a close below this level being a bearish development for a further backtest towards 27,600-27,400.
The Nasdaq gave back 0.1% following the late day fade to 8,600. Current and upper support at 8,600-8,550 held with a close below the latter signaling additional weakness towards 8,500-8,450.
The S&P 500 also slipped 0.1% after testing an intraday low of 3,126. Near-term and upper support at 3,125-3,100 held with a close below the latter being a opening up risk towards 3,075-3,050 and the 50-day moving average.
The Russell 2000 bucked the trend after edging up 0.1% while testing a session high of 1,633. Near-term and lower resistance at 1,635-1,650 was challenged but held.
Energy and Healthcare showed strength with gains 0.2% while Technology added 0.1%. Real Estate and Materials led sector weakness with losses of 0.7% and 0.6%, respectively.
In economic news, NFIB Small Business Optimism Index climbed 2.2% to 104.7 in November after a 0.6% gain to 102.4 in October. Gains were broadbased, with the percentage of those expecting a better economy rising to 13% from 10%, and plans to hire increasing to 21% from 18%.
Q3 productivity was revised up to a -0.2% rate versus the preliminary -0.3%, while unit labor costs were revised sharply lower to a 2.5% pace from 3.6% previously. Those compare to Q2 rates of 2.5% and 0.1%, respectively, with the former unrevised and the latter bumped down from 2.4%. Q3 productivity was boosted by an increase in output to 2.3% from 2.1% in the preliminary report, after a 1.9% increase in Q2. Employee hours were at 2.5% rate from 2.4% previously, and Q2’s -0.5%. Compensation per hour was revised down to 2.3% versus 3.3% in the preliminary and 2.5% in Q2. Real Q3 compensation was lowered to 0.5% from the 1.4% preliminary pace, and compares to Q2’s -0.4% reading, with a 1.1% deflator for Q3, unchanged from the preliminary, and versus 3.1% in Q2. On a 12-month basis, productivity edged up to a 1.5% year-over-year clip from Q2’s 1.8% clip.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session after testing an intraday high of $139.35 with lower resistance at $139-$139.50 getting cleared but holding for the 2nd-straight session. A close above the latter and the 50-day moving average would signal additional strength towards $140.50-$141.
Near-term and shaky support is at $138.50-$138. A close below the $137.50 level would be a renewed bearish development with additional risk towards $136.50-$136.
The S&P 500 Volatility Index ($VIX) opened at 15.80 and kissed a low of 14.93 in the opening minutes of trading. New and upper support at 15.50-15 and the 200-day moving average was breached but held. A close below the latter would be a slightly bullish signal for the market with more important levels of recovery at 14.50-14 and the 50-day moving average.
The rise to to 16.90 shortly afterwards challenged lower resistance at 17-17.50 but levels that held. A close above the 18 level would be a more serious bearish signal for the market with upside risk towards the 20-20.50 area.
The Invesco QQQ Trust (QQQ) fell for the 2nd-straight session following the opening pullback to $203.44. Current and upper support at $203.50-$203 was tripped but held. A move below the latter would signal additional weakness with backtest potential towards $202.50-$202.
The rebound to $204.25 afterwards held lower resistance at $204-$204.50. Continued closes above the $205 level would be a more bullish signal for a retest towards $206-$206.50 with the late November all-time high at $206.05.
RSI has flatlined with resistance at 60. Continued closes above this level would signal additional strength towards 65-70. Support is at 55-50 with the latter holding since mid-October.
The Real Estate Select Sector Spider (XLRE) had its 5-session winning streak snapped following the 2nd-half pullback to $38.20. Current and upper support at $38.25-$38 was breached but held. A close below the latter would be an ongoing bearish signal with additional downside risk towards $37.75-$37.50.
Near-term resistance is at $38.50-$38.75 and a downward sloping 50-day moving average.
RSI is in a slight downtrend with support at 45-40. A move below the former would signal additional weakness towards 35-30 and the latter representing the November low. Resistance is at 50 and a level that has been holding since late October.
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.
AT&T (T, $38.06, up $0.02)
T January 39 calls (T200117C00039000, $0.45, flat)
Entry Price: $0.52 (12/5/2019)
Exit Target: $1.05
Stop Target: None
Action: Shares tested an intraday low of $37.82 with upper support at $38-$37.75 and the 50-day moving average getting pierced but holding. Resistance remains at $38.25-$38.50.
Pfizer (PFE, $38.48, up $0.16)
PFE January 40 calls (PFE200117C00040000, $0.25, flat)
Entry Price: $0.40 (11/25/2019)
Exit Target: $0.80
Stop Target: None
Action: Shares traded a high of $38.58 with lower resistance at $38.50-$38.75 getting cleared and holding. Support remains at $38.25-$38.
Viava Solutions (VIAV, $14.60, down $0.07)
VIAV January 16 calls (VIAV200117C00016000, $0.15, flat)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Tuesday’s low touched $14.54 with upper support at $14.50-$14.25 getting challenged but holding. Lowered resistance is at $14.75-$15 and the 50-day moving average.
Limelight Networks (LLNW, $4.02, down $0.24)
LLNW January 3 calls (LLNW200117C00003000, $1.10, 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 (Stop Limit)
Action: Fresh support at $4-$3.90 held on the pullback to $4.01 yesterday. Lowered resistance is at $4.10-$4.20.
A close below $4 will trip the Stop Limit at $1.