MomentumOptions.com Pre-Market Update for 1/23/2020
Nasdaq, S&P Tag Fresh All-Time Intraday Highs
The market rebounded on Wednesday following China’s transparency in dealing with the new coronavirus outbreak helped sentiment as the new strain does not seem as deadly as the previous SARS outbreak. The Tech sector led the major indexes into the black following better-than-expected earnings, with the S&P 500 and the Nasdaq setting new record intraday highs.
The fade into the close, along with the action in the small-caps, was a slight concern following late day news the Chinese government has quarantined the city of Wuhan and plans to shut down the airport and public transportation.
The S&P 500 edged up a point, 0.03% after trading to an intraday and all-time high of 3,337. Fresh and lower resistance at 3,325-3,350 was cleared but held with upside towards 3,375-3,400 on a move above the latter.
The Nasdaq added 0.1% following the intraday run to 9,439. Lower resistance at 9,400-9,450 was breached but held with a move above the latter signaling strength towards the 9,500 area.
The Dow dipped 9 points, or 0.03%, despite testing a high of 29,320 shortly after the opening bell. Near-term and lower resistance at 29,350-29,500 was challenged but held with the recent all-time high at 29,373.
The Russell 2000 extended its losing streak to 3-straight sessions after giving back 0.1% while bottoming at 1,682. Upper support at 1,685-1,670 was breached and failed to hold with risk towards 1,665-1,650 on a move below the latter.
Technology and Financials showed the most sector strength with 0.4% gains while Utilities were up 0.3%. Energy and Real Estate were the worst performing sectors after falling 1% and 0.7%, respectively
In economic news, MBA Mortgage Applications dipped 1.2% following the prior 30.2% surge. The purchase index declined -2% after rising 15.5% previously. Refis slid -1.8% after the 42.7% jump in the previous week. The 30-year fixed rate was steady at 3.87%, and compares to 4.75% a year ago. The 5-year ARM dropped to 3.29% from 3.35% previously.
Chicago Fed National Activity Index for December slipped -0.76 points to -0.35, versus expectations were for a print of 0.15, and follows November’s 1.15 point bounce to 0.41. The 3-month moving average improved to -0.23 from -0.31 previously. Overall, 60 of the 85 indicators that make up the index made negative contributions, while 25 made positive contributions.
Chain Store Sales fell -1.2% last week, after the prior -3% drop, and representing the 3rd-straight weekly decline. The 12-month pace slowed to 1.9% year-over-year from 2.8% previously, and a 3.5% year-over-year pace in the first week of January.
FHFA House Price Index rose 0.2% to 281.2 in November, from a revised 0.4% increase to 280.1 in October, with the index up 4.9% year-over-year. Across the nine census divisions, the 12-month changes were all positive, ranging from 3.8% year-over-year in the New England and the West South Central divisions to 6.3% in the Mountaindivision.
Existing Home Sales for December rebounded 3.6% to 5,540,000, better than expectations of 5,430,000, and follows the 1.7% decline to 5,350,000 in November. Single family sales bounced 2.7%, with condo/coop sales up 10.7%. The months’ supply of homes dropped to a record low of 3 from 3.7. This helped boost the median sales price to $274,500 from $271,300, which is up 7.8% year-over-year.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session with the intraday peak reaching $140.14. Key resistance at $140 was breached but held. Continued closes above this level would be a slightly bullish signal for a run towards $141-$141.50 and early December highs.
Rising support is at $139.50-$139 with backup help at $138.50-$138 and the 50-day moving average.
The S&P 500 Volatility Index ($VIX) was also up for the 2nd-straight session after testing an intraday high of 13.01. Current and lower resistance at 13-13.50 was cleared but held. A close above the latter and the 50-day moving average would be a bearish development with additional risk towards 14.50-15 and the 200-day moving average
Near-term support remains at 12.50-12.
The Spiders Dow Jones Industrial Average ETF (DIA) extended its losing streak to 2-straight despite testing an intraday high of $293.07. Near-term and lower resistance at $293-$293.50 was cleared but held. A close above the latter and last Friday’s all-time high at $293.61 would be a renewed bullish signal with upside potential towards $294-$295.
Current and support at $291.50-$291 held on the late day pullback to $291.58. A close below the latter would signal additional weakness with backtest potential towards $290.50-$290.
RSI is in a downtrend with upper support at 65-60 holding. A close below the latter would signal additional weakness towards 55-50 and early December lows. Resistance is at 70-75.
The Utilities Select Spider (XLU) closed higher for the 9th-straight session with Wednesday’s all-time peak reaching $67.77. Fresh and lower resistance at $67.50-$68 was cleared and held. Continued closes above the latter would be a bullish signal for additional strength towards $69.50-$70, depending on momentum.
Rising support is at $67-$66.50. A close below the latter would be a slightly bearish development and signal a possible near-term top with backtest potential towards $66.50-$66.
RSI remains in overbought territory and at 10-year highs after clearing key resistance at 80. Continued closes above this level keeps 85-90 in play. Support is at 75-70 on a move back below the 80 level.
I have updated our latest trade so let’s go check the action.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 6-0 (100%). 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.
Cisco Systems (CSCO, $49.06, up $0.26)
CSCO March 52.50 calls (CSCO200320C00052500, $0.55, up $0.05)
Entry Price: $0.55 (1/22/2020)
Exit Target: $1.10
Stop Target: None
Action: Shares traded to a high of $49.53 with upper resistance at $49.25-$49.50 getting cleared but holding on the close below the former. Support is at $48.75-$48.50.
AT&T (T, $39.04, up $0.52)
T March 40 calls (T200320C00040000, $0.75, up $0.20)
Entry Price: $0.50 (1/17/2020)
Exit Target: $1.00
Stop Target: 55 cents (Stop Limit)
Action: Set an initial Stop Limit at 55 cents to start protecting profits.
Wednesday’s peak reached $39.14 with lower resistance at $39-$39.25 getting cleared and holding. Rising support is at $38.75-$38.50.
Dropbox (DBX, $17.53, down $0.11)
DBX April 20 calls (DBX200417C00020000, $0.50, down $0.10)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Prior and lower support at $17.50-$17.25 was breached but held on Wednesday’s low. Lowered resistance is at $17.75-$18.