MomentumOptions.com Pre-Market Update for 3/11/2020
Bulls Rebound Despite Choppy Session
The market showed strength to start Tuesday’s session on anticipation of further government stimulus action. President Trump said he would be meeting with the Senate to discuss a possible payroll tax cut after Monday’s close but the gains quickly evaporated after the White House said it is not ready to roll out specific economic proposals in its response to the coronavirus outbreak.
Senate majority leader Mitch McConnell made it clear that he does not like the payroll tax cut idea floated by President Trump as a potential economic boost. The friction briefly pushed the major indexes into negative territory before 2nd-half strength resumed into the closing bell.
The Nasdaq rallied 5% with the intraday high reaching 8,347. Lower resistance at 8,300-8,350 recovered with more important hurdles at 8,400-8,450 and the 200-day moving average.
The Dow jumped 4.9% following the late day run to 25,020. Near-term and lower resistance at 25,000-25,250 was cleared and held with a close above the latter getting 25,500-25,750 back in play.
The S&P 500 also soared 4.9% after closing on its session peak of 2,882. Current and lower resistance at 2,875-2,900 was cleared and held with a move above the latter signaling a retest towards 2,925-2,950.
The Russell 2000 was higher by 2.9% after topping out at 1,351 ahead of the closing bell. Near-term and lower resistance at 1,350-1,365 was breached and held with a move above the latter signaling additional strength towards 1,375-1,390.
Technology and Financials were the strongest sectors after zooming 6.7% and 5.9%, respectively, while Consumer Discretionary surged 5.5%. There were no sector laggards.
In economic news, NFIB Small Business Optimism Index level for February came in at 104.5, versus forecasts of 103.7, and ahead of January’s reading of 104.3. Nearly all of the survey responses were collected before the pick up in coronavirus worries. Increases in plans to hire, expectations for a better economy, and positions not able to fill supported the headline gain. Expectations for higher selling prices, plans to increase capital spending, expectations for higher sales, and expectations of a good time to spend all declined.
Morning Consult’s Index of Consumer Sentiment (ICS) fell -0.2% to 111.4, from 114.8. The index is still above it’s 62.5 average in December but analysts expect further declines into month-end.
Chain store sales were unchanged last week versus the -0.3% drop previously. The 12-month pace slowed to 0.9% year-over-year down from 2.1% previously.
The iShares 20+ Year Treasury Bond ETF (TLT) had its 3-session winning streak snapped following the intraday pullback to $162.03. Fresh and upper support at $162.50-$162 was breached but held by a penny. A close below the latter would signal a further backtest towards $160-$159.50 and previous breakout levels from last week.
Lowered resistance is at $164.50-$165 followed by $167-$167.50.
The S&P 500 Volatility Index ($VIX) fell for the first time in 4 sessions following the first half fade to 43.56. Current and upper support at 45-42.50 was breached but held with more important recovery levels at 40-37.50.
The close back below the 50 level was a slightly bullish signal with near-term resistance now at 47.50-50. However, a pop back back above 50 reopens upside risk towards 55-60.
The Spider S&P 500 ETF (SPY) ended a 3-session slide after testing a late session high of $288.52. Current and lower resistance at $288.50-$289 was cleared but held with more important recovery hurdles at $290-$292.50.
Near-term but shaky support is at $285-$284.50. A move below the latter would signal a retest towards the $282.50-$280 area.
RSI bounced back with current resistance at 40-45. Continued closes above the latter would signal additional momentum towards 50-55. Support is at 35-30.
The Communication Services Select Sector Spider (XLC) rebounded to end a 3-session losing streak after tapping a high of $48.89 ahead of the closing bell. Fresh and lower resistance at $48.50-$49 was cleared and held. A move above the latter would signal additional strength towards $49.50-$50.
Current support is at $48-$47.50 with backup help at $46.50-$46.
RSI is back in an uptrend after clearing lower resistance at 35-40. A close above the latter would signal additional strength towards 45-50. Support is at 35-30.
Futures were showing another rough open to start today’s open so it’s likely the whipsaw action continues. While frustrating, a bottoming process can take several sessions to develop so we just need to see if current support levels hold. Tuesday’s lows pretty much matched Monday’s to setup back-to-back nice looking candlesticks on the charts.
If the VIX can hold 50 again, and lower lows aren’t created, we could add a new trade or two for a short-term rebound. Stay locked-and-loaded throughout the session in case I take action.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 13-2 (87%). 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.
Rambus (RMBS, $12.07, up $0.30)
RMBS April 15 calls (RMBS200417C00015000, $0.25, up $0.05)
Entry Price: $0.45 (3/2/2020)
Exit Target: $0.90
Stop Target: None
Action: Tuesday’s peak reached $12.29 with lower resistance at $12.25-$12.50 getting cleared but holding. Support remains at $11.75-$11.50.
AT&T (T, $35.85, up $1.16)
T March 39 calls (T200320C00039000, $0.20, up $0.05)
Entry Price: $0.50 (2/19/2020)
Exit Target: $1.00
Stop Target: None
Action: Shares tested a high of $35.89 with lower resistance is at $35.75-$36 getting cleared and holding. Support is at $35.50-$35.