MomentumOptions.com Pre-Market Update for 1/2/2020
Bulls Close 2019 on a High Note
The market traded on both sides of the ledger before finishing higher to wrap up the last trading day for 2019. News that President Trump will be signing the phase one trade deal with China on January 15th helped sentiment along with better-than-expected housing numbers.
The small-caps showed the most intraday strength as the dollar fell to a 6-month low with volatility easing going into the end of the week and to start 2020. The official Santa Claus rally that typically happens over the last 5 trading days of the year (and the first 2 of the new year) remains in play following Tuesday’s gains.
The Nasdaq was up for the 1st time in 3 sessions after adding 0.3% with the late session peak reaching 8,975. Lower resistance at 8,950-9,000 was cleared and held with a close above the latter signaling momentum towards 9,050-9,100 and fresh all-time highs.
The Russell 2000 snapped a 3-session slide after gaining 0.3% while trading to an afternoon high of 1,673. Prior and lower resistance at 1,670-1,685 was cleared and held with a close above the latter and the 52-week peak of 1,681 getting the 1,700 level back in focus.
The S&P 500 rebounded after advancing 0.3% and tapping an intraday high of 3,231. Near-term and lower resistance at 3,225-3,250 was cleared and held with a close above the latter and the all-time high of 3,247 getting 3,275-3,300 in focus.
The Dow was also up 0.3% after testing a second half high of 28,547. Current and lower resistance at 28,500-28,750 was cleared and held with a close above the latter and the lifetime high of 28,701 signaling a run towards the 29,000 level.
For 2019, the Nasdaq jumped 35% and the Russell 2000 soared 24%. The S&P 500 surged 28% and the Dow rallied 23%.
Materials and Real Estate were sector standouts after rising 0.7%. Industrials were the only sector laggard after slipping 0.1%. For 2019, all 11 of the S&P 500 sectors closed the year higher for the first time since 2010.
In economic news, S&P Corelogic Case-Shiller home price index increased 0.09% to 218.43 in October, following the 0.09% rise to 218.24 in September. The 12-month rate rose to 2.23% year-over-year versus the 2.08% clip previously. The 10-City index climbed 0.13% to 231.16 following the slight 0.03% gain in September to 230.87. The index is up 1.68% year-over-year versus 1.53% previously. Of the 20 cities tracked, all but one city, San Francisco (-0.43%), posted 12-month gains, led by Phoenix (5.83%) and Tampa (4.86%).
The FHFA home price index rose 0.2% to 280.2 in October after a 0.7% gain to 279.5 in September. Prices are up 5% year-over-year. For the nine census divisions, monthly house price changes from September to October ranged from -0.5% in the East North Central division to 0.7% in the West South Central and East South Central divisions. The 12-month changes were all positive, ranging from 3.5% in the New England division to 6.7% in the Mountain division.
Consumer Confidence slipped 0.3 ticks to 126.5 in December, below forecasts of 128, with the November number revised up to 126.8 from 125.5. The strength was in the present situations index which rose to 170 following the drop to 166.6 last month. The expectations index fell to 97.4 versus 100.3 previously. The labor differential increased to 33.9 after November’s drop to 31.6. The 12-month inflation index dipped to 4.4% from 4.5% in November.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after tumbling to an intraday low of $135.38. Fresh and upper support at $135.50-$135 was breached and failed to hold. A close below the latter would be an ongoing bearish development with additional risk towards $134.50-$134.
Near-term and lowered resistance is now at $136-$136.50 with more important levels of recovery at $137.50-$138 and the 50-day moving average.
The S&P 500 Volatility Index ($VIX) fell for the first time in 3 sessions despite tagging a midday high of 15.39. Upper resistance at 14.50-15 and the 200-day moving average was breached but held for the 2nd-straight session.
The fade to 13.75 afterwards and close below prior and upper support at 14-13.50 was a healthy signal volatility is easing and may have peaked. A close back below the 13 level and the 50-day moving average before week’s end would be a more bullish development and signal a possible return to all-time highs for the market.
The iShares Russell 1000 (IWF) snapped a 2-session losing streak with the late day peak reaching $176.06. Near-term and lower resistance at $176-$176.50 was cleared but held. A close above the latter would be a bullish signal for a retest towards $177.50-$178 and fresh record highs.
Current support is at $175-$174.50. A close below the $174 level would signal a near-term top with additional risk towards $173-$172.50.
RSI is trying to level out after holding support at 70. A close below this level would signal additional weakness towards 65-60. Resistance is at 75-80 with the latter representing overbought conditions from last week and January 2018.
The Industrials Select Sector Spider (XLI) was higher for the first time in 3 sessions despite kissing an intraday low of $81.18. Current and upper support at $81-$80.50 was challenged but held. A close below the latter and the 50-day moving average would be an ongoing bearish development with additional risk towards $79.50-$79 and the December low at $79.26.
Near-term and lowered resistance is at $82-$82.50. Continued closes above the latter and the recent all-time high of $82.66 would be a renewed bullish signal for a run towards $83.50-$84.
RSI has leveled out with support at 50. A move below this level would signal additional weakness towards 45-40 with the latter representing the early December bottom. Resistance is at 55-60. A move above the latter would signal additional strength towards 65-70.
The bulls may have made a statement after rebounding off the Tuesday’s lows and going out at the highs for the session. The action in the VIX was also a bullish signal, provided there is continued follow thru the rest of the week. If so, I should have New Trades as early as this morning.
We will likely be using February, March and April options for our next batch of trades as the regular January options expire in 2 weeks. While there is more reward for trading near-term options, there is also much more risk. However, if there is an earnings trade that looks enticing, we could use January calls or puts to play the action.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 0-0 (0%). 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.
Limelight Networks (LLNW, $4.08, up $0.02)
LLNW January 3 calls (LLNW200117C00003000, $1.10, flat)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)
Stop Target: 75 cents (Stop Limit)
Action: Shares tested a high of $4.11 with lower resistance at $4.15-$4.20 and the 50-day moving average holding. Support remains at $4.05-$4.