MomentumOptions.com Pre-Market Update for 4/1/2020
Bears Wrap up a Nasty Month/ Quarter
The market was choppy throughout Tuesday’s session after trading on both sides of the ledger before closing lower. The losses were mostly contained until the final hour with the major indexes trading in a tighter range after better-than-expected economic news outweighed ongoing coronavirus concerns.
Volatility continued to ease with the end of month and first quarter wrapping up historic losses for the market. Despite the weakness, near-term resistance levels were pushed for the 4th-straight session with higher highs and higher lows to keep bullish sentiment intact.
The Dow declined 1.8% following the late day backtest to 21,852. Near-term and upper support at 22,000-21,750 failed to hold with a close below the latter signaling additional weakness towards 21,500-21,250.
The S&P 500 was off 1.6% with the 2nd half low tapping 2,571. Near-term and upper support at 2,575-2,550 was breached but held with a move below the latter reopening risk towards 2,525-2,500.
The Nasdaq lost 1% after testing a low of 7,642 ahead of the closing bell. Current support at 7,700-7,650 was breached but levels that held with a close below the latter signaling a retest towards 7,600-7,550.
The Russell 2000 was down 0.5% after testing an intraday low of 1,130. Current and upper support at 1,135-1,120 was breached but held with a close below the latter signaling a further pullback towards 1,115-1,100.
For the month of March, the Dow tanked 13.8%; the S&P 500 sank 12.5%: and the Nasdaq stumbled 10.1%. For the 1st quarter, the Dow plummeted 23.2%; the S&P 500 dropped 20%; and the Nasdaq fell 14.1%.
Energy was the only sector that showed strength after rising 1.5%. Utilities were the leading laggard after giving back 4% while Real Estate and Financials sank 3.2% and 2.8%, respectively.
In economic news, Redbook reported sales slowed to a 1.3% last week, from 1.7% previously. The month got off to a slow start with a -0.1% dip. Compared to last year, the month-to-date pace slowed marginally to a 7.5% year-over-year pace versus 7.9% previously. Also for the week, sales slowed to a 6.3% year-over-year clip compared ot 9.1% previously.
Chain Store Sales plummeted -10.3% last week after rebounding 2.8% in the prior week. The 12-month index dropped to -6.7% year-over-year after a 2.9% pace previously. All retail segments were weaker on the 12-month basis, and this latest week was hit by the isolation policies as consumers reported not shopping at all. The upcoming numbers are expected to get worse since most retailers have been shuttered, with only grocery, drug, and other essential stores able to open.
S&P Corelogic Case-Shiller home price index dipped -0.04% in January to 218.6 for the 20-City measure after an unchanged reading at 218.7 in December. Compared to last year, the index posted a 3.1% year-over-year growth rate versus 2.8% previously. The 10-City index rose declined -0.10% to 231.3 versus December’s 0.01% gain to 231.5. It’s accelerated to a 2.6% year-over-year rate versus 2.4%. All 20 cities posted gains on a 12-month basis, led by Phoenix (6.9%) and Seattle (5.1%), with Chicago (0.6%) and New York (0.8%) bringing up the rear.
Chicago PMI slipped 1.2 points to 47.8 in March, versus forecasts of 40, after rebounding 6.1 points to 49 in February. Nearly all of the components declined, with the business barometer sliding at a faster pace. The 3-month moving average was little changed at 46.6 versus 46.7.
Consumer Confidence dropped 12.6 points to 120.0 in March, topping forecasts for a print of 110, after edging up 2.2 ticks to 132.6 in February. Most of the weakness came from the expectations gauge which dropped to 88.2 from 108.1. The present situations component fell to 167.7 versus from 169.3. The labor market differential slid to 31 from 32.6 and is the lowest since last June. The inflation component was steady at 4.5%.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after testing a first half low of $164.56. Current and upper support at $165-$164.50 was breached and failed to hold. A close below the latter would signal ongoing weakness towards $163-$162.50.
Lowered resistance is at $165.50-$166 followed by $167-$167.50.
The S&P 500 Volatility Index ($VIX) extended its losing streak to 2-straight
session after testing an intraday low of 50.88. Current and upper support at 52.50-50 was tripped but held. A close below the 50 level would signal a continued pullback towards 47.50-45.
Lowered resistance is at 57.50-60 followed by 62.50-65.
The Spiders Dow Jones Industrial Average ETF (DIA) was down for just the 2nd time in 6 sessions after trading to an intraday high of $224.75. Current and lower resistance at $224.50-$225 was cleared but held with additional hurdles at $227-$227.50.
Near-term support at $219-$218.50 was breached but levels that held on the fade to $218.44 afterwards. A close below the latter would be a slightly bearish development with retest potential towards $217.50-$215. The 50-day moving average has fallen below the 200-day moving average to form a death cross. This is typically a bearish development for lower lows.
RSI is showing signs of rolling over after failing resistance at 50. A close above this level would signal additional strength towards 55-60 with the latter representing the February peak. Support is at 45-40 with risk towards 35-30 if the 40 level fails to hold.
The Spider S&P Retail ETF (XRT) extended its losing streak to 3-straight sessions after tapping a late day low of $29.56. Current and upper support at $29.50-$29 was challenged but held. A close below the latter would be an ongoing bearish signal with additional pullback potential towards $28.50-$28.
Near-term resistance is at $30-$30.50. A close above the $31 level would be a slightly bullish signal for continued strength towards $31.50-$32.
RSI is in a slight downtrend with upper support at 35-30 holding. There is risk towards 25-20 on a close below the 30 level. Resistance is at 40.
I could have a new trade today so stay lock-and-loaded in case I take action.
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, $5.70, down $0.05)
LLNW June 5 calls (LLNW200619C00005000, $1.40, flat)
Entry Price: $0.50 (3/18/2020)
Exit Target: $2
Stop Target: $1.05 (Stop Limit)
Action: Shares tested a low of of $5.54 on Tuesday with upper support at $5.50-$5.25 getting challenged but holding. Resistance remains at $5.75-$6.
Rambus (RMBS, $11.10, down $0.32)
RMBS April 15 calls (RMBS200417C00015000, $0.15, down $0.05)
Entry Price: $0.45 (3/2/2020)
Exit Target: $0.90
Stop Target: None
Action: Close the trade to save the remaining premium.