MomentumOptions.com Pre-Market Update for 1/24/2020
Bears Push Key Support Levels
The market was weak throughout Thursday’s first half of action as ongoing concerns over the spread of the coronavirus kept Wall Street in a cautious mode. A report that a new case of the virus was discovered in Singapore and fresh worries regarding containment ahead of the Lunar New Year holidays in China weighed on sentiment.
The afternoon rebound into positive territory was a slightly bullish signal as the major indexes settled well off the session lows while closing mostly higher. However, volatility remains slightly elevated after clearing but holding a key level of resistance.
The Nasdaq climbed 0.2% after trading in a 75-point range while tapping a low of 9,334 shortly after the opening bell. Near-term and upper support at 9,350-9,300 was breached but held with a move below the latter signaling additional weakness towards 9,250-9,200.
The S&P 500 nudged up 0.1% despite the intraday pullback to 3,301. Current and upper support at 3,300-3,275 was challenged but held with risk towards 3,250-3,225 on a close below the latter.
The Russell 2000 was up a half-point, or 0.03%, to snap a 3-session slide despite testing a session low of 1,666. Prior and upper support at 1,675-1,660 was breached but held with risk towards 1,650-1,635 on a close below the latter.
The Dow was down for the 3rd-straight session after dipping 0.1% with the first half low reaching 28,966. Prior and upper support at 29,000-28,800 was breached but held with risk towards 28,600-28,400 on a close below the latter.
Real Estate paced sector strength after rising 1.1% while Industrials and Utilities rallied 1% and 0.9%, respectively. Healthcare led sector laggards after falling 0.5% while Energy and Communication Services were down 0.4%.
In economic news, Initial Jobless Claims rose 6,000 to 211,000, versus forecasts for a print of 215,000, after dropping -9,000 to 205,000 the previous week. This put the 4-week average at 213,250 versus 216,500 previously. Continuing claims declined another -37,000 to 1,731,000 after dropping -36,000 to 1,768,000 previously.
Leading Indicators declined -0.3% to 111.2 in December, missing forecasts for a dip of -0.2%, after a revised 0.1% November gain to 111.5. The index has posted a decline in four of the last five months. Big declines in three of the 10 components contributed to the headline drop, with large negative contributions from rising jobless claims (-0.23%), ISM new orders (-0.18%), and building permits (-0.12). Five indicators made modest positive contributions, inducing stock prices (+0.09%), the leading credit index (+0.08%), and consumer expectations (+0.07%). The average workweek and nondefense capital goods orders components were unchanged
The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 3-straight sessions after surging to an intraday high of $141.38. Prior and lower resistance from early December at $141-$141.50 was cleared but held. Continued closes above the latter would be an ongoing bullish signal with additional hurdles at $142-$142.50.
Rising support is at $140.50-$140. A close below the latter reopens backtest potential towards $139-$138.50.
The S&P 500 Volatility Index ($VIX) was up for the 3rd-straight session with the morning peak reaching 14.15. Prior and lower resistance from the start of the month at 14-14.50 was cleared but held. A close above the 15 level and the 200-day moving average would be a bearish development for the market.
New and rising support is at 12.75-12.25.
The Spider S&P 500 ETF (SPY) was up for the 5th time in 6 despite the morning pullback to $329.41. Current but shaky support at $330-$329.50 was breached but held. A close below the $329 level would signal a possible near-term top with additional weakness towards $328-$327.50.
Near-term and lowered resistance at $332-$332.50 was challenged but held on the 2nd half rebound to $331.92. A close above the latter would be a renewed bullish development for a retest towards $333-$333.50 with Wednesday’s all-time peak at $332.95.
RSI has flatlined with support at 70-65. A close below the latter and the monthly low reopens weakness towards 60 and the mid-December low. Resistance is at 75-80. A close above the latter would be a slightly bullish signal for strength towards 85-90 and overbought levels from January 2018.
The Materials Select Sector (XLB) was down for the 3rd-straight session after sinking to a 1st half low of $59.33. Prior and upper support from earlier in the month at $59.75-$59.25 and the 50-day moving average were breached but levels that held. A close below $59.20 and the monthly low in back-to-back sessions would be a bearish development with additional weakness towards $59-$58.75.
Lowered resistance at $60.50-$61. A close back above the latter would signal a near-term bottom with additional hurdles at $61.50-$62.
RSI is trying to stabilize with support at 45-40. A close below the latter would signal additional weakness towards the 35 area and the low from last October and early August. Resistance is at 50 with additional hurdles at 55-60 and the latter representing the January peak.
On the earnings front, shares of Intel (INTC) soared nearly 7% and were north of $67 after the company reported better-than-expected earnings ($1.52 a share versus $1.25) and revenue for the fourth quarter. In addition, the company provided upbeat guidance for the first quarter and for 2020.
This should give Tech a lift with a positive close today boding well for next week’s overall market action. I still believe the bulls can push higher highs thru the end of the month but the action in the VIX remains the wild card. There is a chance I squeeze one more new trade into the portfolio so stay locked-and-loaded into the close in case I take 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.
Pfizer (PFE, $40.71, up $0.52)
PFE March 42 calls (PFE200320C00042000, $0.45, up $0.15)
Entry Price: $0.45 (1/23/2020)
Exit Target: $0.90
Stop Target: None
Action: Thursday’s high kissed $40.83 with lower resistance at $40.75-$41 getting breached but holding. A close above the latter would be a very bullish development and would refill the gap from the late July tumble below the $41 level. Suppirt is at $40.25-$40.
A golden cross has officially formed with the 50-day moving average closing above the 200-day moving average. This is typically a bullish signal for higher highs.
Cisco Systems (CSCO, $49.00, down $0.06)
CSCO March 52.50 calls (CSCO200320C00052500, $0.55, flat)
Entry Price: $0.55 (1/22/2020)
Exit Target: $1.10
Stop Target: None
Action: Shares tested a low of $48.41 yesterday with upper support at $48.50-$48.25 getting breached but holding. The rebound to $49.17 held lower resistance at $49.25-$49.50.
AT&T (T, $38.63, down $0.41)
T March 40 calls (T200320C00040000, $0.60, down $0.15)
Entry Price: $0.50 (1/17/2020)
Exit Target: $1.00
Stop Target: 55 cents (Stop Limit)
Action: Upper support at $38.50-$38.25 was tripped but held on Thursday’s fade to $38.55 with the options touching a low of 56 cents. Lowered resistance is at $38.75-$39.
Dropbox (DBX, $17.71, up $0.18)
DBX April 20 calls (DBX200417C00020000, $0.50, flat)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Lower support at $17.25-$17 was breached but held on Thursday’s pullback to $17.18. Resistance remains at $17.75-$18.