MomentumOptions.com Pre-Market Update for 12/23/2019
Bulls on 4-Week Win Streak
The market showed continued momentum on Friday with the major indexes setting another round of fresh all-time highs following solid economic news. The drift to higher highs and 4th-straight week of gains remains a bullish signal ahead of the Christmas-shortened week.
Volatility continues to give a neutral reading with the major indexes roughly 4%-5% above their 50-day moving averages. Overbought conditions remain in play but are signaling additional momentum towards January 2018 levels. Additionally, any Santa Claus rally, that may or may not come, happens after Christmas and into the first few days of the New Year.
The S&P 500 was up for the 7th time in 8 sessions after adding 0.5% and breaking out to another all-time intraday high of 3,225. Fresh and lower resistance at 3,225-3,250 was triggered but held with upside potential towards 3,275-3,300 on a close above the latter.
The Nasdaq extended its winning streak to 7-straight sessions while climbing 0.4% following the record run to 8,931. Uncharted territory and lower resistance at 8,900-8,950 was cleared and held with a close above the latter signaling additional momentum towards the 9,000 level.
The Dow was higher by 0.3% with the all-time afternoon high reaching 28,608. Fresh and lower resistance at 28,400-28,600 was cleared and held with a close above the latter signaling a possible overshoot towards 28,800-29,000 area.
The Russell 2000 was also up 0.3% after kissing 1,674 and 3rd-straight 52-week peak. Current and lower resistance from August 2018 at 1,670-1,685 was cleared and held with a move above the latter getting 1,700 in focus.
For the week, the Nasdaq zoomed 2.2% while the Russell 2000 rallied 2.1%. The S&P 500 soared 1.7% and the Dow jumped 1.1%.
Healthcare and Technology paced sector strength after rising 0.3%. Financials and Real Estate were the leading sector laggards after giving back 0.4% and 0.3% respectively
For the week, the best performing sectors were Utilities (2.8%), Communication Services (2.3%) and Real Estate (2.2%). Industrials (-0.6%) and Financials (-0.1%) were the only sectors laggards.
In economic news, GDP for Q3 growth was unchanged at 2.1%, matching forecasts, and compares to 1.9% in the Advance report. Q2 growth registered a 2% clip, with Q1 at 3.1%. Personal consumption was bumped up to 3.2%, better than expected, versus 2.9% previously. Business fixed investment was at a -0.8% rate versus the prior -1%. Government consumption was nudged up to 1.7% versus 1.6%, with Federal spending lowered to 3.3% versus 3.4%. Inventories were relatively neutral after adding $10.4 billion. Net exports subtracted -$9.4 billion versus -$7.6 billion. The chain price index was steady at the prior 1.8% pace. The core rate was unchanged as well at 2.1%.
Consumer Sentiment rose to 99.3 in December’s final read from the University of Michigan survey, versus November’s 96.8 print, and the highest since the 100 reading in May. The current conditions index led, rising to 115.5 versus 111.6 in November. The expectations component improved to 88.9 from 87.3. The 12-month inflation gauge was at 2.3% from November’s 2.5% clip. The 5-year index was at 2.2% compared to the 2.5% reading in November
Personal Income advanced 0.5% in November while Spending increased 0.4%. The unchanged income reading from October was revised higher to 0.1% while the 0.3% gain in consumption was not revised. Compensation increased 0.4% last month, as it did in October. Wages and salaries were also up 0.4% versus the prior 0.5% pace. Disposable income climbed 0.5% from unchanged. The savings rate inched up to 7.9% from 7.8%. The PCE chain price gauges showed the headline rising 0.2%, the same as October. The core rate edged up 0.1%, and the 4th-straight monthly 0.1% gain. The 12-month price indices was at a 1.5% year-over-year pace, compared to 1.4%, while the core rate slowed to 1.6% versus 1.7%.
Baker-Hughes Rig Count reported the U.S. rig count was up 14 rigs to 813, with oil rigs gaining 18 to 685, gas rigs down 4 to 125, and miscellaneous rigs unchanged at 3. The U.S. Rig Count is down 267 rigs from last year’s count of 1,080, with oil rigs lower by 198, gas rigs off 72, and miscellaneous rigs up 3 to 3. The U.S. Offshore Rig Count is up 1 to 24 and unchanged year-over-year.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session after trading to an intraday high of $136.69. Current and lower resistance at $136.50-$137 was recovered. A move above the latter would signal a possible retest towards $138-$138.50 and the 50-day moving average.
Support is at $136-$135.50. A close below the latter would signal additional weakness towards $134.50-$134 and early November lows.
RSI is trying to curl higher with resistance at 45-50. A close above the 50 level would be a bullish signal for additional strength towards 55-60 with the latter representing the late November peak. Support is at 40.
The S&P 500 Volatility Index ($VIX) was up for the 3rd time in 4 sessions despite testing a morning low of 12.04. Current support at 12.25-11.75 was split but held. A close below the 11.50 would confirm possible a possible blowoff top for the market into January with downside risk towards 10.50-10.
The afternoon bounce to 12.61 and 2nd-straight close above the 12.50 level held lower resistance at 12.75-13.25. A close above the latter would signal additional risk towards 13.50-14 and the 50-day moving average.
RSI has flatlined with resistance at 45-50. A close above the latter would signal additional strength towards 55-60 and would be a slightly bearish development for the market. Support is at the 40 level.
The Invesco QQQ Trust (QQQ) extended its winning streak to 8-straight sessions following the intraday push to $212.52 and 7th-straight record high. New and lower resistance at $212-$212.50 was breached but held. Continued closes above the latter would signal additional fluff towards $213.50-$215.
Current support is at $211.50-$211. A move below the $210.50 level would signal additional weakness towards $209-$208.50. A close below the $207.50 level would signal a near-term top.
RSI remains in an uptrend with resistance at 80 and the April high. A close above this level would signal additional strength towards 85 and the January 2018 overbought peak. Support is at 75-70.
The Spider S&P Retail ETF (XRT) had its 3-session winning streak snapped following the pullback to $45.57. Near-term and upper support at $45.50-$45.25 was challenged but held. A close below the $45 level would be a slightly bearish signal with backtest potential towards $44.50-$44.25 and the 50-day moving average.
Resistance is at $46-$46.25. Continued closes back above the $46.50 level would signal additional strength towards $47-$47.25. The 52-week peak from late December 2018 is at $47.13 with the all-time high at $52.20 from August 2018.
RSI is showing signs of rolling over with key support at 60 holding. A move below this level would signal additional weakness towards 55-50. Resistance is at 65-70 with the latter representing the late October peak.
The percentage of Nasdaq 100 stocks trading above the 50-day moving closed at at 89.32%, up 4.86%, with the intraday peak reaching 90.29%. Key resistance at 90% was breached but held. A close above this level would be an ongoing bullish signal with potential towards 92.5%-95%. The February overbought level reached 93.20% twice during the month. Support is at 87.5%-85%. A move below the latter would signal additional weakness towards 82.5%-80%.
The percentage of S&P 500 stocks trading above the 200-day moving average average settled at 79%, up 1.18%, with the session high tapping 79.80%. Current and lower resistance at 80%-82.5% was challenged but held with the January 2018 peak at 82.17%. A close above 82.5% would be an ongoing bullish signal with strength towards 85%-87.5% and overbought levels from July 2014. 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 2 new trades along with the rest of the batch so let’s go check the action.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 46-13 (78%). 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.
Bausch Health Companies (BHC, $30.00, up $0.10)
BHC January 30 calls (BHC200117C00030000, $1.00, down $0.04)
Entry Price: $0.95 (12/20/2019)
Exit Target: $1.90
Stop Target: None
Action: Shares tested a high of $30.36 on Friday with lower resistance at $30.25-$30.50 getting cleared but holding. Support is at $29.75-$29.50.
Intel (INTC, $58.95, up $0.99)
INTC January 60 calls (INTC200117C00060000, $0.73, up $0.25)
Entry Price: $0.65 (12/20/2019)
Exit Target: $1.30
Stop Target: None
Action: Shares kissed and intraday peak of $59.05 with lower resistance at $59-$59.25 getting cleared but holding. A close above the latter and the late November all-time high of $59.59 would signal a push towards $59.75-$60. New support is at $58.50-$58.25.
Exxon Mobil (XOM, $69.94, up $0.55)
XOM January 70 calls (XOM200117C00070000, $1.25, up $0.30)
Entry Price: $1.20 (12/18/2019)
Exit Target: $2.40
Stop Target: 60 cents
Action: Shares rebounded to test a high of $70.23 with lower resistance is at $70-$70.50 getting cleared but holding. Support is at $69.50-$69.
AT&T (T, $39.15, up $0.22)
T January 39 calls (T200117C00039000, $0.60, up $0.10)
Entry Price: $0.52 (12/5/2019)
Exit Target: $1.05
Stop Target: None
Action: Friday’s peak reached $39.26 with lower resistance at $39.25-$39.50 getting cleared and holding. Support is trying to move up to at $38.75-$38.50 and the 50-day moving average.
Pfizer (PFE, $39.23, up $0.26)
PFE January 40 calls (PFE200117C00040000, $0.35, up $0.05)
Entry Price: $0.40 (11/25/2019)
Exit Target: $0.80
Stop Target: None
Action: Lower resistance at $39.50-$39.75 was cleared but held with Friday’s high tapping $39.54. Support remains at $38.75-$38.50 and the 200-day moving average.
Viava Solutions (VIAV, $15.25, down $0.11)
VIAV January 16 calls (VIAV200117C00016000, $0.25, flat)
Entry Price: $0.70 (11/7/2019)
Exit Target: $1.40
Stop Target: None
Action: Shares reached a high of $15.39 on Friday with lower resistance at $15.50-$15.75 getting challenged but holding. Upper support at $15.25-$15 and the 50-day moving average was tripped but held on Friday’s fade to $15.22.
Limelight Networks (LLNW, $3.93, down $0.05)
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, lower to 75 cents (Stop Limit)
Action: Lower the Stop Limit from $1 to 75 cents on the remaining 2/3rd’s to give the trade a little wiggle room.
Shares traded to a morning high of $4.01 with lower resistance at $4-$4.10 and the 50-day moving average holding for the 7th-straight session. Support remains at $3.90-$3.80.