MomentumOptions.com Pre-Market Update for 1/9/2020
Nasdaq, S&P 500 Tap Fresh All-Time Highs
The market showed resiliency on Wednesday following the Iranian missile strikes on two U.S. bases in Iraq that caused concern overnight. In fact, Dow futures were down 400 points at one point before steadily improving ahead of the opening bell.
The market viewed the U.S./ Iran conflict as stabilizing, for now, after tweets from both sides suggested that they are not seeking a further escalation. Iran’s Foreign Minister tweeted that the country is not seeking escalation or war, while President Trump tweeted “all is well” and updated the country ahead of Wall Street’s lunch break.
Tech showed the most strength but the broader market wasn’t far behind as record highs were tapped. Volatility also went on a wild ride and is giving a slightly bullish reading for the market after closing lower for the 3rd-straight session.
The Nasdaq rallied 0.7% following the 2nd half run to 9,168 and new all-time high. Fresh and lower resistance at 9,150-9,200 was breached but held with a close above the latter signaling momentum towards 9,300-9,350.
The Dow gained 0.6% with the late day high reaching 28,866. Current and upper resistance at 28,600-28,800 was cleared but held with continued closes above the latter and all-time high of 28,872 signaling additional strength towards the 29,000 level.
The S&P 500 was up 0.5% after trading to an intraday and lifetime high of 3,267. Prior and lower resistance at 3,250-3,275 was cleared and held with a close above the latter getting 3,300-3,325 in play.
The Russell 2000 climbed 0.3% while the late day high tapping 1,669. Prior and lower resistance at 1,665-1,680 was cleared but held with a close above the latter and the late December 52-week peak at 1,681 getting 1,700 in focus.
Technology zoomed 1.1% to led sector strength while Communication Services, Financials and Healthcare rose 0.7%. Energy tanked 1.7% and was the main sector laggard while Utilities slipped 0.1% to round out the losers.
In economic news, ADP reported private payrolls increased a 202,000 in December, after an upwardly revised 124,000 gain in November, while topping forecasts of 157,000. Much of the strength was in the services component, which climbed 173,000, while the goods producing sector edged up 29,000.
Consumer Credit for November checked in at $12.5 billion versus forecasts for a print of $16.7 billion.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its losing streak to 3-straight sessions despite trading to a morning high of $138.31. Current and lower resistance at $138-$138.50 and the 50-day moving average was cleared but held.
The fade to $136.32 afterwards breached but held prior and upper support at $136.50-$136. A close below the latter would be an ongoing bearish development with further backtest potential towards $135.50-$135.
The S&P 500 Volatility Index ($VIX) extended its losing streak to 3-straight sessions despite surging to a high of 15.24 shortly after the opening bell. Near-term and upper resistance at 14.50-15 and the 200-day moving average were breached but held.
The midday tumble to 12.83 after the President’s comments on Iran was a bullish signal along with the close below the 13.50 level. Fresh and upper support at 13.25-12.75 and the 50-day moving average were breached but held. A close below the 12.50 level would be an ongoing bullish development for the market.
The Spider Small-Cap 600 ETF (SLY) was up for the 1st time in 4 sessions after testing an intraday high of $72.45. Near-term and lower resistance at $72.50-$73 was challenged but held. A move above the latter would be a renewed bullish signal with upside potential towards $74.50-$75 and fresh 52-week highs.
Current support is at $72-$71.50. A close below the latter be a bearish development with backtest potential towards $70.50-$70 and the 50-day moving average.
RSI is back in an uptrend with near-term resistance at 60. A close above this level would signal additional strength towards 65-70 with the latter representing the late December high. Another move past 70 could get overbought levels from last February at 75 in play. Support is at 55-50.
The Consumer Staples Select Spiders (XLP) remains in a 4-session mini trading range after tagging a 2nd half high of $62.52. Near-term and lower resistance at $62.50-$62.75 was cleared but held. A close above $63 and the recent all-time high of $63.36 would be a bullish signal with additional momentum towards $64.50-$65.
Current support is at $62-$61.75. A close below $61.50 and the 50-day moving average would be a bearish development and signal a near-term top.
RSI is back in an uptrend after clearing key resistance at 50. Continued closes above this level would signal additional strength towards 55-60. Support is at 45-40.
The bulls just won’t rollover and I’ve mentioned since late December the start of 4Q earnings next week will be the market’s blowoff top or the start of the eventual pullback to the 50-day moving averages. The current US/ Iran flareup deflated oversold market conditions, but not to the point where levels still aren’t stretched.
The action over the first trading sessions for 2020 has been breathtaking to say the least. I have also been saying this year could represent one of the best in history to trade volatility. However, we will need to be very nimble and take what the market gives us while looking out for the occasionally curveballs.
Our trade is the Spider Gold Shares (GLD) is up a quick 40% in just 2 days and I have already set a Stop Limit to protect profits. We will be out of the Limelight Networks (LLNW) trade by next Friday with at least a 100% return a sweet way to start the New Year.
AT&T (T) is up 21% and is on the verge of making a pop past $40. We could piggy-back this trade on the move so stay tuned. Dropbox (DBX) is up single-digits and we have a real good chance of making triple-digits by April if shares clear $20.
As far as Pfizer (PFE), the trade is flat but shares look poised to clear $40 as well and should start adding to our bottom line. On that note, let’s go check the current 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.
Spider Gold Shares (GLD, $146.86, down $1.11)
GLD February 145 puts (GLD0221P00145000, $1.40, up $0.30)
Entry Price: $1.00 (1/7/2020)
Exit Target: $2.00 (Limit Order)
Stop Target: $1.15 (Stop Limit)
Action: Set a Limit Order to close half the trade at $2. Set an initial Stop Limit at $1.15 to start protecting profits.
Shares tested a low of $146.14 with fresh and upper support at $146-$145.50 getting challenged but holding. A close below the latter would confirm a near-term top with additional weakness towards $144.50-$144. Lowered resistance is at $147.50-$148.
Dropbox (DBX, $18.46, down $0.07)
DBX April 20 calls (DBX200417C00020000, $0.95, down $0.05)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Wednesday’s pullback reached $18.22 with upper support at $18.25-$18 getting tripped but holding. Resistance remains at $18.75-$19.
Pfizer (PFE, $39.06, up $0.31)
PFE March 40 calls (PFE200320C00040000, $0.75, up $0.05)
Entry Price: $0.75 (1/2/2020)
Exit Target: $1.50
Stop Target: None
Action: Yesterday’s peak reached $39.22 with lower resistance at $39-$39.25 getting cleared and holding. Support remains at $38.75-$38.50.
AT&T (T, $39.37, up $0.12)
T March 40 calls (T200320C00040000, $0.85, up $0.05)
Entry Price: $0.70 (1/2/2020)
Exit Target: $1.40
Stop Target: 72 cents
Action: Shares tested a high of $39.55 with lower resistance at $39.50-$39.75 getting cleared but holding. Support is trying to move up to $39.25-$39.
Limelight Networks (LLNW, $4.42, up $0.03)
LLNW January 3 calls (LLNW200117C00003000, $1.40, flat)
Entry Price: $0.60 (9/11/2019)
Exit Target: $1.50-$2 (closed 1/3 @ $1.40 on 10/22)
Stop Target: $1.15 (Stop Limit)
Action: Shares traded to a high of $4.43 with prior and lower resistance at $4.40-$4.50 getting cleared and holding. Current support remains at $4.30-$4.20 and the 50-day moving average.