MomentumOptions.com Pre-Market Update for 4/28/2020

Market Riding 4-Session Winning Streak 

8:00am (EST)

The market showed strength for the 4th-straight session as a number of states are preparing to relax coronavirus lockdowns, with a few having starting the process. The second rollout for small business applying for more aid from the nearly $500 relief bill also helped sentiment. 

Another backdrop that fueled fresh resistance levels were the strength in the small-caps after blowing by the 1,250 level, and the Dow Transports ($TRAN) rallying 2.8% and within striking distance of clearing its 50-day moving average. Volatility also fell below another key level of support and comes ahead of the busiest week for 1Q earnings along with an update from the Fed.

The Russell 2000 zoomed 4% with the late day peak reaching 1,289. Fresh and lower resistance at 1,275-1,300 was cleared and held with a close above the latter having gap-up potential 1,325-1,350.

The S&P 500 rose 1.5% following the late day push to 2,887. Current and resistance at 2,875-2,900 was tripped and held with a close above the latter signaling momentum towards 2,925-2,950. 

The Dow was also higher by 1.5% after closing back above its 50-day moving average with the session high tapping 24,207. New and lower resistance at 24,250-24,500 was recovered with a close above the latter keeping upside potential towards 24,750-25,000 in focus.

The Nasdaq was higher by 1.1% after testing an intraday high of 8,754. Prior and lower resistance from mid-month at 8,750-8,800 was cleared but held with a move above the latter signaling strength towards 8,950-9,000 and levels from early March. 

Financials and Real Estate were the strongest sectors after surging 3.5% and 2.9%, respectively, while Materials added 2.6%. There were no sector laggards for the 2nd-straight session.

In economic news, April Dallas Fed manufacturing index fell another -3.7 points lower to -73.7, a new record, following March’s record -71.2 point dive to -70. There were pretty much nothing but negative signs although the company outlook index inched up slightly to -62.6 from -65.6, with employment rising to -21.2 from -23. Production dropped to -55.3 from -35.3. New orders fell to -67 from -41.3, with the orders rate growth rate sliding to -62.2 from -44.9. The workweek tumbled to -40.2 from -22.4. Prices paid declined to -19.6 from -5.9, and prices received slid to -24.6 from -9.2. The 6-month general business activity index fell to -42.1 from -39.5 while capex was little changed at -19.7 versus -19.8.

Meanwhile, the FOMC meets on Tuesday and Wednesday, and will issue its post-meeting statement at 2:00pm (EST) on Wednesday with following comments from Fed Chairman Powell at 2:30pm (EST). The March 3rd half-point surprise rate cut, and ensuing full-point cut on March 15th, took the target range to 0-0.25%, hence re-establishing ZIRP for the first time since 2015. 

Wall Streets believe further rate cuts into negative territory are off the table, given both internal and public opposition for now, leaving little room for any policy changes at the meeting. The market will likely focus on the statement and ensuing press conference for signals regarding future policy options, including further portfolio expansion or forward guidance.

The iShares 20+ Year Treasury Bond ETF (TLT) fell for the first time in 3 sessions following the late session pullback to $167.44. Prior and upper support at $167.50-$167 was breached but held. A close below the latter would be an ongoing bearish signal with additional backtest potential towards $165.50-$165.

Lowered resistance is at $168-$168.50 followed by $170-$170.50.

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The S&P 500 Volatility Index ($VIX) extended its losing streak to 4-straight sessions after trading to an afternoon low of 32.51. Prior and upper support from early March at 32.50-32 was challenged but held. A close below the latter would signal additional weakness towards the 31.50-30 area.

Lowered resistance is at 34.50-35 followed by 37-37.50.

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The iShares Russell 1000 (IWF) was up for the 3rd time in 4 sessions after trading to an intraday and monthly high of $170.82. Key resistance at $170 was cleared and held. Continued closes above this level would be a bullish signal for a retest towards $172.50-$175, depending on momentum.

Current and rising support is at $169.50-$169. A close back below the latter would be would be a slightly bearish signal with additional downside risk towards $167.50-$167.

RSI is in an uptrend with key resistance at 60 and the monthly peak holding. Continued closes above this level would signal additional strength towards 65-70 with the latter representing the early February high. Support is at 55-50.

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The Energy Select Sector Spider (XLE) was up for the 4th-straight session after testing a 2nd-half high of $35.62. Near-term and upper resistance at $35.50-$36 and the 50-day moving average was cleared but held. A close above the $36.50 level and the monthly peak at $36.46 has gap-up potential towards $40-$41.

Support is at $35-$34.50 followed by $33.50-$33.

RSI is curling higher on the close above lower resistance at 55-60 and the latter representing the early January peak. Support is at 50 with a close below this level signaling weakness towards 45-40.

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I have updated our current trades so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 17-4 (81%). 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.

AT&T (T, $30.54, up $0.83)

T June 32 calls (T200619C00032000, $0.75, up $0.10)

Entry Price: $1.25 (4/14/2020)

Exit Target: $2.50

Return: -37%

Stop Target: 40 cents (Stop Limit)

Action: Lower resistance at $30.50-$30.75 was recovered on Monday’s run to $30.68. Rising support is at $30-$29.75.

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Dropbox (DBX, $20.80, up $0.59)

DBX May 20 calls (DBX200515C00020000, $1.90, up $0.40)

Entry Price: $1.05 (4/6/2020)

Exit Target: $2.10, raise to $2.75

Return: 81%

Stop Target: $1.20, raise to $1.60 (Stop Limit)

Action: Raise the Exit Target from $2.10 to $2.75. Raise the Stop Limit from $1.20 to $1.60 to further protect profits.

Yesterday’s peak reached $21 with fresh and lower resistance at $21-$21.25 getting tagged but holding. Rising support is at $20.25-$20.

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