MomentumOptions.com Pre-Market Update for 4/29/2020
Bulls Take a Breather Ahead of Major Earnings Announcements/ Profit Alert (DBX)
The market settled mostly lower on Tuesday following a strong open as disappointing economic news and the start of the Fed’s 2-day meeting weighed on sentiment. Additional selling pressure came after a predictive model often cited by White House officials warned the U.S. coronavirus death toll could climb higher than previously projected if states reopen prematurely.
As far as 1Q earnings, five of the six companies with the largest market caps in the S&P – Alphabet (GOOGL), Microsoft (MSFT), Facebook (FB), Apple (AAPL) and Amazon (AMZN) will be reporting over the next 2 days.
The Russell 2000 showed continued strength after rising 1.3% with the opening high reaching 1,316. New and lower resistance at 1,300-1,320 was cleared but held with a close above the latter signaling additional strength towards 1,330-1,350.
The Dow dipped 0.1% following the first half push to 24,512. Near-term and lower resistance at 24,250-24,500 was cleared but held for the 2nd-straight session with a close above the latter signaling upside potential towards 24,750-25,000.
The S&P 500 was down 0.5% after testing an intraday high of 2,921. Current and lower resistance at 2,900-2,925 was breached but held with a close above the latter getting 2,950-2,975 in focus.
The Nasdaq fell 1.4% despite trading to a high of 8,830 shortly after the opening bell. Prior and lower resistance from mid-month at 8,800-8,850 was cleared but held with a close above the latter signaling strength towards 9,000-9,050.
Energy was the strongest sector after soaring 2.3% while Industrials and Materials were higher by 1.9%. Healthcare and Communication Services led sector laggards after giving back 2% and 1.8%, respectively.
In economic news, Advance goods trade deficit unexpectedly widened to -$64.2 billion in March after shrinking to -$59.9 billion in February. Goods exports dropped -6.7% to $127.6 billion after bouncing 0.5% to $136.7 billion in February while imports declined 2.4% to $191.9 billion following the -2.6% drop to $196.6 billion. Wholesale inventories declined -1% to $650 billion following February’s -0.6% decline to $655.8 billion. Retail inventories rebounded 0.9% to $666.8 billion after dipping -0.4% to $661.7 billion, previously.
February Case Shiller home price index rose 0.5% to 219.8 for the 20-City index after a flat reading at 218.7 in January and is up 3.5% year-over-year versus 3.1% previously. The 10-City index rose 0.4% to 232.3 following the slight dip to 231.4 previously and is up 2.9% year-over-year versus 2.6% previously. As in January, all 20 cities posted 12-month gains, led by Phoenix (7.5%) and Seattle (6%), with Chicago bringing up the rear (0.7%).
Richmond Fed Manufacturing Index dropped -55 points to -53 in April, versus forecasts for a reading of -38, and a new record low. The future 6-month index rose 12 points to -7 from -19. For the current readings, new order volume slumped to -61 from 0, while the employment index fell to -21 from -7 with the workweek sliding to -28 from 3. Prices paid rose to 1.48% from 1.29%, though prices received slowed to 0.92% from 1.22% and is the weakest since November 2016. For some of the future gauges, the new order index rose to -14 from -20, though employment dropped to -14 from 1, while the workweek dipped to -19 from -12. Price trends showed a decline in prices paid to 1.93% from 1.99%, with prices received at 1.04% from 1.6%.
Consumer Confidence tanked another -31.9 points to 86.9 in April following March’s -13.8 point plunge to 118.8. Forecasts were for a print of 90. The current conditions index cratered to 76.4 from 166.7. The expectations component actually improved to 93.8 from 86.8 on hope for a V-shaped recovery. The labor differential took a massive hit, falling to -13.6 from 29.5 while the 12-month inflation gauge jumped to 5.3% versus 4.5%.
The iShares 20+ Year Treasury Bond ETF (TLT) remains in a mini 10-session trading range after trading to a midday high of $169.85. Current and lower resistance at $169.50-$170 was cleared and held. A move above the latter would signal another retest towards $172-$172.50.
Support is at $168.50-$168 followed by $167.50-$167.
The S&P 500 Volatility Index ($VIX) snapped a 4-session slide despite testing a morning low of 30.54. Prior and upper support from early March at 30.50-30 was challenged but held. A close below the latter would signal additional weakness towards 27.50-25.
The bounce to 35.39 afterwards breached but held lowered resistance at 35-35.50. A close above the latter would be a bearish signal for the market with further upside potential towards 37-37.50.
The Wilshire 5000 Composite Index ($WLSH) fell for the first time in 5 sessions despite Tuesday’s high tapping 29,447. Near-term and lower resistance at 29,250-29,500 was cleared but held. A move above the latter would signal additional momentum towards 29,750-30,000.
Current and upper support is at 28,750-28,500 held on the late day fade to 28,823. A move below the latter would be a slightly bearish signal with additional selling pressure towards 28,250-28,000 and the 50-day moving average.
RSI is showing signs of leveling out with key resistance at 60 holding. A close above this level would signal additional strength towards 65-70 and prior peaks from February. Crucial support is at 50 with a close below this level signaling weakness towards 45-40.
The Communication Services Select Sector Spider (XLC) had its 4-session winning streak snapped following the intraday pullback to $48.09. Current support at $48.50-$48 was breached and failed to hold. A move below the latter would signal additional weakness towards $47.50-$47 and the 50-day moving average.
Near-term resistance is at $49-$49.50. Continued closes above the latter would be a more bullish signal for a run towards $50-$50.50 and the 200-day moving average.
RSI is back in a downtrend with upper support at 55-50 failing and the latter holding for the past 3 weeks. Key resistance from early February is at 60 with a close above this level signaling strength towards 65-70.
I have updated our latest trade, WU, along with our other current positions.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 18-4 (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.
Western Union (WU, $19.13, unchanged)
WU June 20 calls (WU200619C00020000, $0.80, up $0.10)
Entry Price: $0.80 (4/28/2020)
Exit Target: $1.60
Stop Target: None
Action: Tuesday’s peak reached $19.56 with lower resistance at $19.50-$19.75 getting breached but holding. Support is at $19-$18.75.
AT&T (T, $30.65, up $0.11)
T June 32 calls (T200619C00032000, $0.75, flat)
Entry Price: $1.25 (4/14/2020)
Exit Target: $2.50
Stop Target: 40 cents (Stop Limit)
Action: Lower resistance at $31-$31.25 was cleared but held on Tuesday”s trip to $31.12. Rising support is at $30.75-$30.50.
Dropbox (DBX, $20.80, up $0.
DBX May 20 calls (DBX200515C00020000, $1.60, down $0.30)
Entry Price: $1.05 (4/6/2020)
Exit Target: $2.75
Stop Target: $1.60 (Stop Limit)
Action: The Stop Limit at $1.60 tripped on yesterday’s fade to $20.47.