MomentumOptions.com Pre-Market Update for 12/16/2019

Market Finishes Flat After Strong Open

8:00am (EST)

The market showed continued strength on Friday’s open while setting another round of record highs amid conflicting reports about the status of trade negotiations between the U.S. and China. Chinese trade ministers held a press conference to give their take on the nature of the phase one trade deal agreement that has been reached, after which President Donald Trump made his own announcement.

The major indexes fell into negative territory midday over concerns about the details and further clarification that includes a rollback of some tariffs, the scrapping of further tariffs originally set for Sunday, and promises of targeted U.S. agricultural purchases by China. The flat close was a slight disappointment to a bullish week but the action in the VIX is still signaling higher highs for the market.

The Nasdaq climbed 0.2% with the morning high reaching 8,768. Near-term and lower resistance at 8,750-8,800 was breached but held with a close above the former signaling additional upside towards 8,850-8,900.

The S&P 500 edged up a fifth-point, or 0.01%, following the opening pop to 

3,182 and fresh all-time high. Current and lower resistance at 3,175-3,200 was cleared but held with a close above the latter leading to a possible push towards 3,200-3,225.

The Dow rose 3 points, or 0.01%, after testing a first half and record high of 28,290. Lower resistance at 28,200-28,400 was cleared but held for the 2nd-straight session with a close above the latter leading to blue-sky territory at 28,600-28,800.

The Russell 2000 was down 0.4% after failing key resistance at 1,650 on the opening high. The backtest to 1,632 breached upper support at 1,635-1,620 but a level that held with a close below the latter signaling additional risk towards the 1,600 level.

For the week, the Nasdaq rallied 0.9% while the S&P gained 0.7%. The Dow was higher by 0.4% and the Russell 2000 added 0.3%.

Utilities and Technology led sector strength after rising 0.8% and 0.7%, respectively. Energy and Materials paced sector laggards after falling 0.8%.

For the week, the best performing sectors were Financials (2.9%), Materials and Technology (2.4%), and Industrials (2.2%). Real Estate (-2.5%) and Utilities (-0.8%) were the only sectors in the red.

In economic news, Retail Sales increased 0.2% in November, below forecasts of 0.5%, and were up 0.1% excluding autos. The 0.3% rise in October headline sales was revised up to 0.4%, and the 0.2% gain ex-autos was nudged up to 0.3%. Sales excluding autos, gas, and building materials edged up 0.1% versus the prior 0.2% rise. Compared to last November, headline sales are up 2.9% year-over-year, and are at a 2.5% pace ex-autos. Auto sales increased 0.5% after bouncing 1.0% previously. Gas station sales increased 0.7% from 1.7%. Clothing sales fell -0.6% from -0.3%. General merchandise sales rose 0.1% from 0.3%. Building materials were unchanged from -0.3%. Furniture sales inched up 0.1% from -0.7%. General merchandise sales were up 0.1% from 0.3%, with sales at department stores down -0.6%. Health, personal care sales dropped -1.1% from the prior 0.5% gain.

Import Prices increased 0.2%, with Export Prices up 0.2% in November. Those follow respective October declines of -0.5% and -0.1%. For import prices, petroleum rebounded 1.1% after dropping -3.3% previously. Excluding petroleum, import prices were 0.2% higher versus -0.1%. Industrial supplies prices were 1.1% higher from -1.5%. Prices with China were -0.1% versus -0.1%, and were 1.1% firmer with Canada versus -1.2%. As for exports, agricultural prices were up 2.2% from 1.7%. Excluding ag, prices were flat from -0.2%.

Business Inventories rebounded 0.2% in October, matching estimates, while sales declined -0.1%. The unchanged inventory reading from September was bumped down to -0.1%, while the -0.2% slip in September sales was knocked down to -0.4%. The inventory-sales ratio remained steady at 1.40.

Baker-Hughes reported the U.S. rig count was unchanged at 799, with oil rigs up 4 to 667, gas rigs down 4 to 129, and miscellaneous rigs unchanged at 3. The U.S. Rig Count is down 272 rigs from last year’s count of 1,071, with oil rigs down 206, gas rigs down 69, and miscellaneous rigs up 3 to 3. The U.S. Offshore Rig Count is up 1 to 23 and unchanged year-over-year. 

The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after trading to a high of $139.61. Prior and lower resistance at $139-$139.50 was cleared and held. A close below the latter and the 50-day moving average would signal a possible near-term bottom with additional strength towards $140.50-$141.

Support is trying to move up to at $137.50-$137. A close below $136.50 would be a renewed bearish signal with additional risk towards $135-$134.50.

RSI is back in a slight uptrend after clearing resistance at 50. Continued closes above this level would signal additional strength towards 55-60. Support is at 45 with a move below this level signaling downside risk towards 40-35.

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The S&P 500 Volatility Index ($VIX) fell for the 4th-straight session with the intraday low tapping 12.54. Fresh and upper support at 13-12.50 was recovered. Continued closes below the latter would signal ongoing momentum for the market with additional risk towards 12-11.50. The late November lows kissed 11.42 and 11.44 in back-to-back sessions.

Near-term and key resistance is at 13.50-14 and a downward sloping 50-day moving average. There is fluff up to 14.50-15 on a close below the former. However, a close back above 15 and the 200-day moving average would be a slightly bearish development and signal a possible near-term top for the market.

RSI is in a downtrend with key support at 40 and a level that has been holding since mid-October. A close below 40 would signal additional weakness towards 35-30 and early July lows. Resistance is at 50.

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The Spider Small-Cap 600 ETF (SLY) had its 2-session winning streak snapped despite trading to an opening high of $72.06. Near-term and lower resistance at $72-$72.50 was cleared but held. A close above the latter and last Thursday’s 52-week peak at $72.30 would signal additional strength towards $73-$73.50 and levels from May 2018.

Current support is at $71-$70.50. A close below the former would be a slightly bearish development with backtest potential towards $69.50-$69 and the 50-day moving average.

RSI is back in an downtrend with support at 60 holding. A close below this level would signal weakness towards 55-50. Resistance is at 65-70.

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The Dow Jones Transportation Average ($TRAN) was down for the first time in 3 sessions following the pullback to 10,734. Upper support at 10,800-10,700 was breached and failed to hold. A close below the former and the 50-day moving average would signal additional weakness towards 10,500-10,400 and the 200-day moving average.

Near-term resistance is at 10,900. Continued closes above this level would be a renewed bullish development for a retest towards 11,000-11,200 with the current 52-week peak at 11,226 from early November.

RSI is in a slight downtrend with support at 50. A close below this level would signal additional weakness towards 45-40 and the latter representing the monthly low. Resistance is at 55-60. A close above the former would be a renewed bullish signal for additional strength towards 65-70.

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The percentage of S&P 500 stocks trading above the 200-day moving average closed at at 74.50%, up 0.2%, with the intraday peak reaching 75.09%. Key resistance at 75% was tripped but held. A close above this level would be an ongoing bullish signal with potential momentum towards 77.5%-80% and January 2018 highs. Support is at 72.5%-70%. A move below the latter would signal additional weakness towards 67.5%-65% with the late December low at 65.41%.

The percentage of Nasdaq 100 stocks trading above the 50-day moving average settled at 79.61%, up 3.89%, with the session high tapping 81.55%. Current and lower resistance at 80%-82.5% was cleared but held. A close above the latter would be an ongoing bullish signal with strength towards 85%-87.5% and overbought levels from July. Near-term support is at 77.5%-75%. A close below the latter would be a slightly bearish signal for additional weakness towards 72.5%-70%.

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.

Boston Scientific (BSX, $45.09, up $0.42)

BSX January 45 calls (BSX200117C00045000, $1.20, up $0.10)

Entry Price: $0.75 (12/11/2019)

Exit Target: $1.50

Return: 60%

Stop Target: 90 cents (Stop Limit)

Action: Friday’s fresh all-time high reached $45.27 with new and lower resistance at $45.25-$45.50 getting cleared but holding. A close above the former could lead to a run towards $46.50-$47. Rising support at $44.75-$44.50.

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AT&T (T, $38.26, down $0.09)

T January 39 calls (T200117C00039000, $0.45, flat)

Entry Price: $0.52 (12/5/2019)

Exit Target: $1.05

Return: -13%

Stop Target: None

Action: Upper support at $38.25-$38 and the 50-day moving average held on the fade to $37.95 on Friday. Resistance remains at $38.50-$38.75.

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Pfizer (PFE, $38.33, down $0.21)

PFE January 40 calls (PFE200117C00040000, $0.20, down $0.05)

Entry Price: $0.40 (11/25/2019)

Exit Target: $0.80

Return: -50%

Stop Target: None

Action: Upper support at $38.25-$38 was breached but held on the backtest to $38.07. Resistance is at $38.50-$38.75. 

Shares have been in a 13-session trading range and will likely make a sharp move once $39 is cleared, or, on a close below $37.75.

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Viava Solutions (VIAV, $14.94, down $0.16)

VIAV January 16 calls (VIAV200117C00016000, $0.20, flat)

Entry Price: $0.70 (11/7/2019)

Exit Target: $1.40

Return: -71%

Stop Target: None

Action: Upper support at $14.75-$14.50 held on Friday’s fade to $14.89. Resistance is at $15-$15.25 and the 50-day moving.

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Limelight Networks (LLNW, $3.95, up $0.04)

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)

Return: 94%

Stop Target: $1 (Stop Limit)

Action: Lowered resistance at $4-$4.10 and the 50-day moving average held on the rebound to $4.03. Support is at $3.90-$3.80.

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