MomentumOptions.com Pre-Market Update for 1/3/2020
Bulls Trip Another Round of Fresh Highs to Start 2020
The market showed strength for the 2nd-straight session and on the first trading day for 2020 with the major indexes tagging another round of all-time highs. News that China’s central bank will add stimulus for its banks helped fuel the rally here and abroad.
Expectations for solid U.S. growth, fading trade tensions and continued central bank accommodation are still supporting stocks. However, the small-caps slacked but volatility continued to ease and is still signaling higher market highs over the near-term.
The Nasdaq was up for the 2nd-straight session after rising 1.3% while testing an intraday all-time high of 9,093. Prior and lower resistance at 9,000-9,050 was cleared and held with a close above the latter signaling additional strength towards 9,100-9,150.
The Dow jumped 1.2% following the late day run to 28,872 and record high. Fresh and lower resistance at 28,800-29,000 was cleared and held with a close above the latter keeping upside potential towards 29,200-29,400 in play.
The S&P 500 added 0.8% with the 2nd half and lifetime high tapping 3,258. Uncharted territory and lower resistance at 3,250-3,275 was breached and held with a close above the latter signaling a possible push towards the 3,300 level.
The Russell 2000 was down for the 3rd-time in 4 sessions after slipping 0.1% with the intraday low hitting 1,653. Current and upper support at 1,665-1,650 was breached but held with a move below the latter signaling additional weakness towards 1,635-1,620 and the 50-day moving average.
Industrials and Technology led sector strength after soaring 1.9% while Communication Services and Consumer Discretionary rose 1.2%. Utilities paced sector laggards after falling 1.3% while Real Estate and Materials were down 1.2%.
In economic news, Initial Jobless Claims fell 2,000 to 222,000 following the 11,000 drop to 224,000 in the prior week. This left the 4-week moving average at 233,250 versus 228,500. Continuing claims were 5,000 higher at 1,728,000, after sliding 2,000 to 1,723,000 previously.
PMI Manufacturing Index dipped -0.2 points to 52.4 in December, from 52.6 in November, and below expectations of 52.5. The preliminary December reading was 52.5.
December Challenger Job-Cut Report announced layoffs at 32,843, the lowest since July 2018. Job cuts were 25% below the level seen in December of 2018.
The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 2-session slide after rebounding to an intraday high of $137.53. Prior and lower resistance at $137.50-$138 was cleared but held. A close above the latter and the 50-day moving average would be a bullish signal for additional strength towards $138.50-$139.
New support is at $136.50-$136.
The S&P 500 Volatility Index ($VIX) fell for 2nd-straight session following the intraday backtest to 12.42. Prior and upper support at 12.50-12 was cleared and held on the close back below the 50-day moving average. A close below the latter would confirm another leg higher for the market with downside risk in the VIX towards 11.50-11.
Lowered resistance is at 13-13.50. A close back above 14 would signal a retest towards 14.50-15 and the 200-day moving average.
The Wilshire 5000 Composite Index ($WLSH) extended its winning streak to 2-straight sessions after testing an all-time intraday high of 33,143. Fresh and lower resistance is at 33,100-33,200 was cleared and held. A close above the latter would signal a continued breakout towards 33,300-33,400.
Current support is at 33,000-32,900. A close below 32,750 would confirm a near-term peak with additional weakness towards 32,600-32,500.
RSI is back in an uptrend with resistance at 75-80. A close above the latter would signal additional strength towards 85 and overbought levels from January 2018. Support is at 70-65.
The iShares MSCI Emerging Markets Fund (EEM) was up for the 4th time in 5 sessions and 2nd-straight after closing at a 52-week and session peak of $45.78. Multi-year and lower resistance from October 2017 at $45.75-$46 was cleared and held. A close above the latter would be an ongoing bullish signal for a run towards $47-$47.50 and late November 2017 resistance levels.
Fresh support is at $45.50-$45.25. A close below the $45 level would signal a possible near-term top.
RSI is in an uptrend with resistance at 80 and the December top. Continued closes above this level would signal additional strength towards 85 and overbought levels from January 2018. Support is at 75-70.
I have updated our latest trades so let’s go check 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.
Pfizer (PFE, $39.14, down $0.04)
PFE March 40 calls (PFE200320C00040000, $0.75, down $0.10)
Entry Price: $0.75 (1/2/2020)
Exit Target: $1.50
Stop Target: None
Action: Shares kissed a low of $38.88 with upper support at $39-$38.75 getting breached but holding. Resistance is at $39.25-$39.50.
AT&T (T, $38.86, down $0.22)
T March 40 calls (T200320C00040000, $0.70, down $0.15)
Entry Price: $0.70 (1/2/2020)
Exit Target: $1.40
Stop Target: None
Action: Thursday’s low tapped $38.71 with upper support at $38.75-$38.50 getting breached but holding. Resistance is at $39-$39.25.
Limelight Networks (LLNW, $4.18, up $0.10)
LLNW January 3 calls (LLNW200117C00003000, $1.15, up $0.05)
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 $4.18 with upper resistance at $4.15-$4.20 and the 50-day moving average holding. Support is trying to move up to $4.10-$4.05.