MomentumOptions.com Pre-Market Update for 5/15/2020
Bulls Make Late Day Comeback
The market opened with heavy losses following another disappointing jobless claims report but one that topped expectations. The selling pressure eased midday as prospects of additional stimulus and states reopening for business helped sentiment.
The final hour rally also lifted Tech and the small-caps out of negative territory to complete the comeback off the opening lows. Volatility held a key level of resistance before closing near its session low.
The Dow gained 1.6% after testing an afternoon peak of 23,630. Current and lower resistance at 23,500-23,750 was recovered with a move above the latter likely leading to a retest towards 24,000-24,250.
The S&P 500 rose 1.2% while trading in a 86-point range and closing on the session high of 2,852. Prior and lower resistance at 2,850-2,875 was cleared and held with a close above the latter signaling additional strength towards 2,900-2,925.
The Nasdaq was up 0.9% following the run to 8,945 ahead of the closing bell. Near-term and lower resistance 8,900-8,950 was reclaimed with a move above the latter getting 9,000-9,050 back in focus.
The Russell 2000 climbed 0.4% after closing on its session peak of 1,237. Lower resistance at 1,235-1,250 was cleared and held with a close above the the latter signaling additional momemtum towards 1,260-1,275.
Financials led sector strength after soaring 2.6% while Consumer Discretionary and Technology added 1.5% and 1.3%. Consumer Staples fell 0.3% and was the only sector that showed weakness.
In economic news, Initial Jobless Claims fell -195,000 to 2,981,000, following the prior week’s -691,000 decline to 3,176,000. This left the 4-week moving average at 3,616,500 versus 4,180,500. Continuing claims rose 456,000 to 22,833,000 after climbing 4,366,000 to 22,377,000 previously.
April import prices dropped -2.6% and export prices were down -3.3% following respective March declines of -2.3% and -1.6%. The export price drop is the biggest on record going back to 1989, and import price slide is the steepest since January 2015. On a 12-month basis, import prices are contracting at a -6.8% year-over-year pace versus -4.2%. For export prices, the pace has declined to -7% year-over-year from -3.8%. For import prices, petroleum continued to lead the weakness, tumbling another -33% after diving -26.5% previously. Excluding petroleum, import prices fell -0.5% from -0.2%> Industrial supplies prices dropped -12.3%. Import prices with Canada were down -10.2% from -4.8%, and edged up 0.1% with China versus a prior unchanged reading. For export prices, agriculture slid another -3.1% after falling -1.5% previously. Ex-ag, prices declined -3.3% from -1.7%.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 3-straight sessions after surging to an intraday high of $168.15. Prior and lower resistance at $168-$168.50 was breached but held. A close above the latter would signal additional momentum towards $169.50-$170.
Rising support is at $166.50-$166 followed by $164.50-$164 and the 50-day moving average.
The S&P 500 Volatility Index ($VIX) closed lower for the first time in 3 sessions despite testing a morning high of 39.28. Prior and lower resistance at 39.50-40 was challenged but held. A close above the latter would be a very bearish signal for the market.
The fade to 32.33 afterwards breached and held upper support at 33-32.50. A close below the latter would likely signal a retest towards 30.50-30.
The Spider Small-Cap 600 ETF (SLY) was up for the first time in 4 sessions despite tapping an intraday low of $47.44. Late March and upper support at $47.50-$47 was breached but held. A close below the latter would be a bearish signal with additional pullback potential towards $45.50-$45.
Lower resistance is at $50-$50.50 was challenged but held on the late day rebound to $49.97. A close above the latter and the 50-day moving average would be a slightly bullish signal for additional strength towards $52-$52.50.
RSI has flatlined with key support at 40 holding. A move below this level would be a bearish signal for additional weakness towards 35-30. Resistance is at 45-50.
The Health Care Select Sector Spider (XLV) snapped a 2-session slide after trading to an afternoon high $99.63. Current and lower resistance at $99.50-$100 was recovered. A close above the latter would be a bullish signal for a retest towards $101-$101.50.
Near-term support is at $97.50-$97. A close below the latter would be a renewed bearish signal with additional selling pressure towards $95.50-$95.
RSI is curling higher with lower resistance at 55-60 getting cleared and holding with the latter representing the monthly peak. Key support is at 50. A close below this level would be a bearish signal with additional risk towards 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: 19-5 (79%). 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.
Technology Select Spiders (XLK, $93.00, up $1.17)
XLK June 85 puts (XLK200619P00085000, $1.60, down $0.30)
Entry Price: $1.75 (5/13/2020)
Exit Target: $3.50
Stop Target: $1.00
Action: Thursday’s late day rebound tapped $93.06 with lower resistance at $93-$93.50 holding into the close. Support is at $92.50-$92.
Western Union (WU, $18.38, up $0.06)
WU June 21 calls (WU200619C00021000, $0.15, flat)
Entry Price: $0.50 (5/9/2020)
Exit Target: $1.00
Stop Target: None
Action: Shares tested a high of $18.39 with lower resistance at $18.50-$18.75 getting challenged but holding. Support is at $18.25-$18 with backup help at $17.75-$17.50.
Limelight Networks (LLNW, $5.05, up $0.03)
LLNW June 5 calls (LLNW200619C00005000, $0.60, flat)
Entry Price: $0.60 (5/6/2020)
Exit Target: $1.20
Stop Target: None
Action: Thursday’s low kissed $4.85 with upper support at $4.90-$4.80 getting breached but holding for the 2nd-straight session. Resistance is at $5.20-$5.30.