MomentumOptions.com Pre-Market Update for 12/13/2019
Bulls Trigger Another Round of Fresh All-Time Peaks
The market surged to fresh all-time highs on Thursday following news high ranking trade negotiators have offered to cut existing tariffs by as much as half on roughly $360 billion of Chinese-made goods as well as to cancel a new round of tariffs set to take effect this weekend.
The tariff reduction offer was likely made earlier in the week, and in exchange, the U.S. has demanded that China make firm commitments to purchase large quantities of U.S. agricultural and other products, to better protect U.S. intellectual-property rights and to allow greater access to China’s financial services sector.
The S&P 500 soared 0.9% after trading to a new record high of 3,176. Fresh and lower resistance at 3,150-3,175 was cleared and held with a close above the former leading towards uncharted territory at the 3,200 level.
The Dow gained 0.8% following the intraday run to 28,224 and fresh record high. New and lower resistance at 28,200-28,400 was cleared but held with a close above the latter leading towards blue-sky territory at 28,600-28,800.
The Russell 2000 rallied 0.8% after trading to a 52-week peak of 1,654. Key resistance at 1,650 was cleared but held with a close above this level keeping 1,660-1,675 in play.
The Nasdaq climbed 0.7% with the all-time intraday high tapping 8,745. New and lower resistance at 8,700-8,750 was cleared but held with a close above the former signaling additional momentum towards 8,800-8,850.
Energy and Financials were the strongest sectors after surging 2% while Materials and Technology were higher by and 1.4% and 1.1%, respectively. Real Estate was down 1.2% to led sector weakness while Utilities and Consumer Staples gave back 0.4% and 0.1%, respectively, to round out the losers.
Initial Jobless Claims surged 49,000 to 252,000, well above estimates for a print of 212,000, after dropping 10,000 to 203,000 in the prior week. The 4-week moving average climbed to 224,000 versus 217,750. Continuing claims fell -31,000 to 1,667,000 following the 56,000 jump to 1,698,000 previously.
November PPI was flat, versus expectations for a rise of 0.2%, while the core rate fell -0.2%. There were no revisions to the respective October gains of 0.4% and 0.3%. The 12-month headline rate was steady at the 1.1% year-over-year from October, the ex-food and energy rate slowed to 1.3% year-over-year compared to 1.6% previously. Goods prices were up after rebounding 0.7% previously. This included a 1.1% increase in food costs versus the prior 1.3% rise. Energy prices rose 0.6% from 2.8% previously. Services costs dropped -0.3% from 0.3% in October.
The iShares 20+ Year Treasury Bond ETF (TLT) had its 3-session winning streak snapped after plunging to an intraday and fresh monthly low of $136.61. Prior and upper support from early November at $137-$136.50 was breached but held. A close below the latter would be an ongoing bearish development with additional risk towards $135.50-$135.
New and lowered resistance is at $138-$138.50 followed by more important recovery hurdles at $139-$139.50 and the 50-day moving average.
The S&P 500 Volatility Index ($VIX) traded to a high of 15.55 shortly after the opening bell. Near-term and upper resistance 15-15.50 and the 200-day moving average was stretched but held.
The tumble to 13.60 afterwards and close below upper support at 14-13.50 and the 50-day moving average was a bullish development. Continued closes below the latter would signal another leg higher for the market with additional downside targets at 13-12.50.
The S&P 400 Mid Cap Index ($MID) was up for the 2nd-straight session after testing a fresh 52-week peak of 2,040. Prior and lower resistance from August 2018 at 2,040-2,060 was cleared by nearly a point but held. Continued closes above the former and the all-time high just north of 2,050 would be an ongoing bullish signal for a continued breakout towards 2,080-2,100.
Current support is at 2,020-2,000. A close below the latter would signal a further backtest towards 1,980-1,960 and the 50-day moving average.
RSI is in an uptrend with resistance at 65-70. A close above the latter and the November high would be a bullish signal for additional strength towards 75-80 and overbough levels from February. Support is at 60 with risk towards 55-50 on a move back below this level.
The Consumer Staples Select Spiders (XLP) remained in a 5-session trading range despite testing a record high of $63.02. Near-term and lower resistance at $63-$63.50 was cleared but held. A close above the former would be an ongoing bullish signal with additional upside potential towards $64.50-$65.
Current support is at $62.25-$61.75. A close below the $61.50 level and the 50-day moving average would be a slightly bearish signal with downside risk towards $60.75-$60.25 and prior lows from early November.
RSI has flatlined with resistance at 70 and the monthly peak that has been holding since July. A close above this level would signal additional strength towards 75 and the April high. Support is at 60 with weakness towards 55-50 on a move back below this level.
The technical outlook is still flashing near-term overbought conditions but there could still be another 2%-3% upside on continued momentum. In the meantime, I have updated our current trades, including a Stop Limit for BSX, so let’s go check the action.
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.
Boston Scientific (BSX, $44.67, up $0.85)
BSX January 45 calls (BSX200117C00045000, $1.10, up $0.35)
Entry Price: $0.75 (12/11/2019)
Exit Target: $1.50
Stop Target: 90 cents (Stop Limit)
Action: Set an initial Stop Limit at 90 cents to start protecting profits.
Shares zoomed to a fresh all-time high of $44.85 with new resistance at $44.75-$45 getting cleared but holding. Rising support at $44.25-$44.
AT&T (T, $38.35, up $0.18)
T January 39 calls (T200117C00039000, $0.45, flat)
Entry Price: $0.52 (12/5/2019)
Exit Target: $1.05
Stop Target: None
Action: Thursday’s high hit $38.57 with lower resistance at $38.50-$38.75 getting cleared but holding. Support has moved up to $38.25-$38 and the 50-day moving average.
Pfizer (PFE, $38.54, up $0.32)
PFE January 40 calls (PFE200117C00040000, $0.25, up $0.05)
Entry Price: $0.40 (11/25/2019)
Exit Target: $0.80
Stop Target: None
Action: Lower resistance at $38.50-$38.75 was cleared and held on the run to $38.62 yesterday. Support remains at $38.25-$38.
Viava Solutions (VIAV, $15.10, up $0.39)
VIAV January 16 calls (VIAV200117C00016000, $0.20, up $0.05)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Prior and lower resistance at $15-$15.25 and the 50-day moving average was cleared and held with Thursday’s peak reaching $15.16. New support is at $14.75-$14.50.
Limelight Networks (LLNW, $3.91, down $0.03)
LLNW January 3 calls (LLNW200117C00003000, $1.05, 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: Upper support at $3.90-$3.80 held on Thursday’s fade to $3.86. Lowered resistance is at $4-$4.10 and the 50-day moving average.