MomentumOptions.com Pre-Market Update for 1/28/2020
Bears Pushing 50-Day MA’s
The market showed continued weakness on Monday following news the coronavirus has killed 81 people in China and infected over 2,800 worldwide, including a handful of people in America. A total of 1,900 new cases were diagnosed over the weekend alone, according to the World Health Organization and Chinese state media.
The Centers for Disease Control and Prevention said that there have been no new U.S. coronavirus cases confirmed other than the five already reported. The agency added the risk in the U.S. from the virus remains low but the global impact remains a much more serious concern.
The Nasdaq tanked 1.9% following the opening pullback to 9,088. Prior and upper support at 9,200-9,150 was tripped and failed to hold with risk towards 9,050-9,000 on a close below the 9,100 level.
The S&P 500 stumbled 1.6% after trading to a 1at half low of 3,235. Key and upper support at 3,250-3,225 was breached and failed to hold with additional selling pressure towards the 3,200 and the 50-day moving average on a move below the latter.
The Dow extended its losing streak to 5-straight after also tumbling 1.6% while testing a low of 28,440. Prior and upper support at 28,600-28,400 was breached but held with risk towards 28,200-28,000 on a close below the latter and the 50-day moving average.
The Russell 2000 fell 1.1% following the morning backtest to 1,633. Prior and upper support at 1,650-1,635 and the 50-day moving average was breached and failed to hold with a close below the latter getting 1,625-1,610 in focus.
Energy led sector weakness after plunging 2.8% followed by Technology and Materials with losses of 2.4% and 2.2% respectively. There was no sector strength.
In economic news, New Home Sales dipped -0.4% in December to 694,000, versus forecasts for a print of 728,000, and follows November’s revised -1.1% drop to 697,000. Regionally, sales declined in the Northeast and South, and rose in the Midwest and West. The months’ supply of homes rose to 5.7 from 5.5. The median sales prices increased 3.3% to $331,400 after November’s -0.8% slide to $320,900. This represented a 0.5% year-over-year clip versus 4% in November.
Dallas Fed Manufacturing Survey rose 3 points to -0.2 in January after slipping -1.9 points to -3.2 in December. Expectations were for a reading of -3.1. The index has been in negative territory for 4-straight months, which hasn’t happened since mid-2016. The employment subindex dropped to 1.9 from 6.2, but wages rose to 16.3 from 14.6. New orders surged to 17.6 from 1.6. Prices paid dipped to 9.5 from 14.5, with prices received falling to -1.9 from 0.7. The 6-month activity index improved slightly to 7.6 from 6.4, with employment at 25.3 from 17.8 and new orders surging to 40.1 from 32.6. The future price indexes showed prices paid rising to 20.2 from 14.1 and prices received little changed at 10 versus 10.2. Capex increased to 28.3 versus 20.1.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 5th-straight session after closing on the high of $144.29. Prior and lower resistance from early October at $144-$144.50 was cleared and held. A close above the latter would signal additional strength towards $145.50-$146 with last October’s peak at $146.03.
Rising support is at $143.50-$143. A close below the $142.50 level would signal a false breakout with backtest potential towards $141.50-$141.
The S&P 500 Volatility Index ($VIX) extended its winning streak to 5-straight after zooming to a session high 19.02. Prior and upper resistance from early October at 18.50-19 was breached but held. A close above the 19.50 level would be an ongoing bearish signal with upside risk towards 21-21.50. The October highs reached 21.46 and 21.44 in back-to-back sessions.
Current and new support is at 17.50-17. A close below the 16 level would be a slight relief for the market with more important levels to recover at 15-14.50 and the 200-day moving average.
The Wilshire 5000 Composite Index ($WLSH) was down for the 2nd-straight session after tapping an intraday low of 32,919. Prior and upper support from the start of the month at 33,000-32,800 was breached but held. A close below the latter would signal additional weakness towards 32,600-32,400 and the 50-day moving average.
Lowered resistance is at 33,200-33,400. A close back above the 33,500 level would be a more bullish signal for a retest towards 33,600-33,800.
RSI is in a downtrend with support at 45-40 and the early October low near the 35 area. Resistance is at 50 that represented prior and key support from early December.
The Industrials Select Sector Spider (XLI) fell for the 2nd-straight session and 4 of the past 5 while closing on the low at $81.97. Prior and upper support at $82-$81.50 was tripped and failed to hold. A close below the latter and the 50-day moving average would be an ongoing bearish development with additional risk towards $80.50-$80.
Current and lowered resistance is at $82.50-$83 with additional hurdles at $83.50-$84.
RSI is in a downtrend following the close below upper support at 45-40 with the latter representing the early December bottom. A close below 40 would signal additional weakness towards 35-30 and levels from early October and the beginning of August. Resistance is at 50-55.
Pfizer (PFE) is reporting earnings this morning so we should get some pin action on the open with our current trade.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 7-0 (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, $40.16, up $0.34)
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: Lower resistance at $40-$40.25 was cleared and held on yesterday’s push to $40.43. Support remains at $39.75-$39.50.
Cisco Systems (CSCO, $48.85, down $0.
CSCO March 52.50 calls (CSCO200320C00052500, $0.35, down $0.27)
Entry Price: $0.55 (1/22/2020)
Exit Target: $1.10
Stop Target: None
Action: Shares traded to a low of $47.27 with prior and upper support at $42.25-$47 holding. Lowered resistance is at $48.75-$49. Earnings are due on February 12th.
Dropbox (DBX, $16.95, down $0.39)
DBX April 20 calls (DBX200417C00020000, $0.30, down $0.10)
Entry Price: $0.90 (1/6/2020)
Exit Target: $1.80
Stop Target: None
Action: Prior and upper support at $17-$16.75 was breached and failed to hold on the pullback to $16.82. Lowered resistance is at $17.25-$17.50.