MomentumOptions.com Pre-Market Update for 3/3/2020
Bulls Roar Back but Remain on Shaky Ground
The market showed strength to start March while ending several losing streaks and rebounding off severely oversold conditions to close out February. The strong bounce came as the first deaths in the U.S. from the coronavirus were reported over the weekend with the number rising to 6 by Monday’s closing bell.
Developing stories into the closing bell gave the major indexes additional momentum after President Donald Trump met with top drug-company executives and asked them to accelerate work on a coronavirus vaccine.
The Dow was higher by 5.1% after trading to a late day high of 26,706. Near-term resistance at 26,500-26,750 was cleared and held with a close above the latter keeping upside potential towards 27,000-27,250 and the 200-day moving average in play.
The S&P 500 soared 4.6% while closing on its session peak of 3,090. Near-term resistance at 3,075-3,100 was cleared and held with the close above the 200-day moving average getting 3,125-3,150 back in focus.
The Nasdaq surged 4.5% after settling at 8,952 and session high, as well. New resistance at 8,950-8,900 was recovered with a move above the latter signaling additional strength towards 8,950-9,000.
The Russell 2000 rose 2.9% also went out on the session and closing high at 1,518. Fresh and lower resistance at 1,520-1,535 was challenged but held with additional hurdles at 1,550-1,565.
Utilities and Technology were the strongest sectors after zooming 5.9% and 5.8%, respectively, while Consumer Staples and Financials rose 5.4% and 5.1%. There were no sector laggards.
In economic news, February PMI Manufacturing Index dipped to 50.7 in the final February read, from the 50.8 preliminary, and is 1.2 points lower than the 51.9 in January. Expectations were for a print of 50. The new orders index slid to 50.4 versus 52.4 in January. The employment index also declined versus last month, was the weakest since last August.
Construction Spending climbed 1.8% in January after December’s revised 0.2% increase. The residential spending component rose 2% from the prior 1.5% gain. Nonresidential spending rebounded 1.6% from -0.7%. Public spending surged 2.6% following the prior 0.6% gain. Private spending jumped to 1.5% from 0.1%.
ISM Manufacturing Index for February came in at 50.1, below forecasts of 50.4, after a reading of 50 in January. The employment index inched up to 46.9 from 46.6. New orders dropped to 49.8 versus 52. New export orders fell to 51.2 from 53.3, while imports plunged to 42.6 from 51.3. Prices paid fell to 45.9 versus 53.3.
The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 1st time in 3 sessions sessions despite trading to another all-time intraday high of $156.50. Lower resistance at $156.50-$157 was tagged but held with a move above the latter signaling momentum towards $158-$158.50.
The fade to $153.76 breached and failed to hold near-term and upper support at $154-$153.50. A close below the latter would signal a possible near-term top with additional backtest potential towards $152.50-$152.
The S&P 500 Volatility Index ($VIX) was down for just the 2nd time in 8 sessions after testing an intraday low of 31.50. Near-term and upper support is at 31.50-31 was tapped but held with continued closes below 30-27.50 being a more bullish signal for additional weakness.
Lowered resistance is at 35-37.50. A move back above the 40 level would reopen risk towards 45-50.
The Wilshire 5000 Composite Index ($WLSH) snapped a 7-session slide after trading in an 1,411 point range while testing an afternoon high of 31,418. Current and lower resistance at 31,250-31,500 and the 200-day moving average was recovered. A close above the latter would be an ongoing bullish signal with additional upside potential towards 31,750-32,000.
Near-term but shaky support is at 31,000-30,750 with backup help at 30,500-30,250. A move back below the 30,000 level would signal a retest towards 29,500-29,250 with last Friday’s low at 29,146 and the early October low of 29,131.
RSI snapped back with lower resistance at 35-40 getting cleared and holding. A close above the latter would signal additional strength towards 45-50. Near-term support is at 30 with a move back below this level signaling weakness towards 20-15 and the latter representing the October 2018.
The Consumer Discretionary Select Spiders (XLY) was up for the first time in 7 sessions following the intraday bounce to $119.82. New and lower resistance at $119.50-$120 was cleared and held. A close above the latter would be a bullish signal for additional strength towards $121-$121.50 and the 200-day moving average.
Current support is at $119-$118.50. Another drop below the $115 level would signal additional weakness towards the $112.50 area with last Friday low at $112.53.
RSI is back in an uptrend after closing above lower resistance at 35-40. A move above the latter would signal additional momentum towards 45-50. Support is at 30 followed by 25-20 with the latter a level that has been holding since mid-2002. A move below 20 would signaling additional weakness towards 15 and the low from May 2001.
I have updated our current trades and I have already set Stop Limits to ensure profits. I would love to see a v-shape recovery but we may have to prepare for continued whipsaw action and a possible retest to last Friday’s lows if the 1-day rally quickly fades.
If I add New Trades today, I will send out an email and text alert.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 11-1 (92%). 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.
Intel (INTC, $58.18, up $2.66)
INTC March 60 calls (INTC200320C00060000, $1.10, up $0.20)
Entry Price: $0.60 (3/2/2020)
Exit Target: $1.80
Stop Target: 75 cents (Stop Limit)
Action: Set an initial Stop Limit at 75 cents to start protecting profits and to avoid a loss.
Monday’s high reached $58.22 with lower resistance at $58-$58.50 getting cleared and holding. Unreliable support is at $57-$56.50.
Rambus (RMBS, $14.30, up $0.32)
RMBS April 15 calls (RMBS200417C00015000, $0.45, down $0.05)
Entry Price: $0.45 (3/2/2020)
Exit Target: $0.90
Stop Target: None
Action: Shares tested an intraday high of $14.31 with lower resistance at $14.25-$14.50 getting cleared and holding. Support is at $14-$13.75.
Technology Select Spiders (XLK, $93.48, up $5.11)
XLK April 97 calls (XLK0417C00097000, $1.80, up $0.35)
Entry Price: $1.20 (3/2/2020)
Exit Target: $2.40
Stop Target: $1.25 (Stop Limit)
Action: Set an initial Stop Limit at $1.25 to start protecting profits and to avoid a loss.
Yesterday’s high tapped $93.50 with new and lower resistance at $93.50-$93 getting cleared but holding by 2 pennies. Current support is at $92.50-$92.
Bank of America (BAC, $29.37, up $0.87)
BAC April 34 calls (BAC200417C00034000, $0.20, flat)
Entry Price: $0.40 (2/26/2020)
Exit Target: $0.80
Stop Target: None
Action: Shares rebounded to test an afternoon high of $29.38 with lower resistance at $29.25-$29.50 getting cleared and holding. Support is at $29-$28.75.
AT&T (T, $37.18, up $1.96)
T March 39 calls (T200320C00039000, $0.45, up $0.15)
Entry Price: $0.50 (2/19/2020)
Exit Target: $1.00
Stop Target: None
Action: Shares soared to a high of $37.42 on Monday with lower resistance is at $37.25-$37.50 getting cleared and holding. Support is at $36.75-$36.50.