MomentumOptions.com Pre-Market Update for 3/31/2020
Bulls Get Monday Win
The market showed strength throughout much of Monday’s action following a slow start after President Trump extended the CDC coronavirus guidelines until the end of April. While this was not a surprise, the market seemed to focus more on encouraging news concerning testing and vaccine development rather than the continued fallout of a stalled economy.
The Nasdaq jumped 3.6% following the afternoon push to 7,784. Lower resistance at 7,750-7,800 was recovered with a move above the latter getting 7,850-7,900 back in focus.
The S&P 500 gained 3.4% after trading to a late day peak of 2,631. Prior and lower resistance at 2,625-2,650 was breached and held with a close above the latter signaling additional strength towards 2,675-2,700.
The Dow rose 3.2% after testing a high of 22,378 ahead of the closing bell. Near-term and lower resistance at 22,250-22,500 was cleared and held with continued closes above the the latter keeping 22,750-23,000 in play.
The Russell 2000 was up 2.3% after closing on its session high of 1,158. Current and lower resistance at 1,150-1,165 was recovered with a close above the latter signaling a retest towards 1,175-1,190.
Healthcare led sector strength after zooming 4.7% while Technology and Consumer Staples added 4.2% and 3.9%. There was no sector weakness.
In economic news, Pending Home Sales rose 2.4% to 111.5 in February, topping forecasts of for a decline of -1.6%, and January’s reading of 108.9. On a 12-month basis, pending sales accelerated to an 11.5% year-over-year pace versus 6.7% previously. Sales increased in all four regions with the West up 4.6% on the month, and the Midwest rising 4.5%.
Dallas Fed Manufacturing Index plunged 68.8 points to -70 in March, an all-time low, and follows the 1.4 point rise to 1.2 in February. The region is suffering the plunge in oil prices with demand destruction and the supply glut, along with ongoing pandemic fears. The production component plummeted to -35.3 from 16.4. The employment component dropped to -23 from -0.9, while the workweek fell to -22.4 from 2.1. New orders cratered to -41.3 versus 8.4, and the orders growth rate was -44.9 versus 3.6. Prices paid declined to -5.9 versus 12.8, with prices received at -9.2 from -0.1. The 6-month general business index declined to -39.5 following the 10.4 jump to 18 in February. The future new orders gauge slid to -20.4 from 34.1, with employment at -16.7 from 20.4. The outlook on prices paid was -7.9 from 21.4, with prices received at -13.9 from 11.6. The capex index declined to -19.8 versus 21.2.
St. Louis Fed Bullard said adding trillions of dollars of borrowing to the U.S. national debt is necessary fiscal support because of coronavirus-related shutdowns and won’t hamper the country’s ability to grow in the future. He added the debt is being taking on at very low interest rates.
Bullard noted that rates will probably stay very low for quite a while. He added the U.S. can carry 10% more debt, it is not ideal, but we can certainly do it.
The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 3 sessions despite testing an intraday high of $170.11. Prior and lower resistance from the start of the month at $170-$170.50 was cleared but held. Continued closes above the latter would signal continued strength towards $172.50-$175.
The fade to $165.95 held upper support at $166-$165.50. A close below the $165 level would signal additional weakness towards $163-$162.50.
The S&P 500 Volatility Index ($VIX) remains in a mini 4-session trading range following the backtest to 56.60. Current and upper support at 57.50-55 was cleared and held. A close below the 50 level would be a more bullish signal for continued market strength.
Lowered resistance is at 60-62.50 followed by 65-70.
The Spider Small-Cap 600 ETF (SLY) was up for the 4th time in 5 sessions after closing on its session high of $48.67. Current and lower resistance at $48.50-$49 was recovered with additional hurdles at $50-$50.50.
Near-term support is at $48-$47.50. A close below the $47 level would be a slightly bearish development with retest potential towards $45.50-$45.
RSI has flatlined with key support at 40 holding. There is risk towards 35-30 on a close below this level. Resistance is at 45-50.
The iShares PHLX Semiconductor ETF (SOXX) flip-flopped for the 5th-straight session with the high reaching $209.94. Near-term and lower resistance at $209.50-$210 was cleared but held with more important hurdles at $212-$212.50. Continued closes above the $215 level would signal a possible run towards the $220 area and the 200-day moving average.
Current support is at $208.50-$208 with backup help at $207.50-$205.
RSI is trying to curl higher with key resistance at 50. A close above this level would signal additional strength towards 55-60 and the latter representing the February peak. Support is at 45-40.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 14-3 (82%). 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.
Limelight Networks (LLNW, $5.75, up $0.50)
LLNW June 5 calls (LLNW200619C00005000, $1.40, up $0.35)
Entry Price: $0.50 (3/18/2020)
Exit Target: $1.50, raise to $2
Stop Target: 60 cents, raise to $1.05 (Stop Limit)
Action: Raise the Exit Target from $1.50 to $2. Raise the Stop Limit from 60 cents to $1.05.
Shares soared to a high of $5.78 on Monday with prior and lower resistance at $5.75-$6 getting cleared and holding. Rising support is at $5.25-$5.
Rambus (RMBS, $11.29, down $0.
RMBS April 15 calls (RMBS200417C00015000, $0.20, flat)
Entry Price: $0.45 (3/2/2020)
Exit Target: $0.90
Stop Target: None
Action: Lower resistance at $11.50-$11.75 was cleared but held on the bounce to $11.83 yesterday. Support remains at $11.25-$11.