MomentumOptions.com Pre-Market Update for 6/8/2020

Nasdaq Taps Fresh All-Time High

8:00am (EST)

The market was showing a strong open ahead of Friday’s jobs report and got stronger following a surprise upswing in jobs and a much lower unemployment rate than anticipated. 

The gains helped push Tech to a fresh all-time high with the other major indexes now within shouting distance of their previous record peaks. Volatility tagged a new multi-month low to confirm the fresh breakout with all of the main sectors showing strength. 

The Russell 2000 showed the most strength after zooming 3.8% with the 1st half high reaching 1,525. Prior and lower resistance from early March at 1,520-1,535 was cleared but held with a close above the latter signaling additional strength towards 1,550-1,565. Below is a chart of the IWM.

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The Dow was up 2.6% to extend its winning streak to 5-straight sessions following the intraday trip to 27,338 and close back above the 200-day moving average. Prior and lower resistance at 27,000-27,250 was recovered with a close above the latter being a bullish signal for additional upside towards 27,500-28,000.

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The S&P 500 closed higher for the 5th time in 6 sessions after soaring 2.6% with the afternoon peak tapping 3,211. Fresh and upper resistance from late February at 3,200-3,225 was cleared but held with a close above the latter signaling additional momentum towards 3,250-3,275.

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The Nasdaq rose 2.1% with the late day and fresh all-time high tagging 9,845. New and lower resistance at 9,800-9,850 was cleared and held with a move above the latter getting 9,950-10,000 on the map.

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For the week, the Russell 2000 jumped 7.6% and the Dow soared 6.8%. The S&P 500 gained 4.9% and Nasdaq was higher by 3.4%.

Energy showed the most sector strength after zooming 7.4% while Financials, Real Estate, and Industrials rocketed 3.7%. There was no sector weakness.

Over the past 5 sessions, Energy (7.2%) has been the strongest sector followed by Financials (6.8%) and Industrials (6%). Healthcare has been the only sector laggard (-0.2%).

The jobs report was much better than feared as Nonfarm Payrolls increased 2,509,000 after the -20,687,000 drop previously. Expectations were for a loss of -7,725,000. The unemployment rate eased to a 13.3% rate in May, versus forecasts of 19.8%, after rising to 14.7% in April. Hourly earnings declined -1% in May following the 4.7% surge in April which was distorted by a concentration of layoffs in low-wage categories. Hours worked increased to 34.7 from 34.2. The labor force rose 1,746,000 from -6,432,000 while household employment climbed 3,839,000 from -22,369,000. The labor force participation rate edged up to 60.8% after falling to 60.2%. Private payrolls were up 3,094,000 from -19,724,000 with the jobs in the goods producing sector up 669,000 versus -2,373,000. Manufacturing jobs recovered to 225,000 from -1,324,000. Service sector jobs increased 2,425,000 after diving -17,351,000. Leisure/ hospitality jobs were up 1,239,000 from -7,539,000, while trade/transport jobs were 368,000 higher from -3,225,000.

Consumer Credit plummeted -$68.8 billionin April after sinking -$11.5 billion in March. Both components declined, though with revolving credit posting a hefty -$58.3 billion drop, more than doubling the -$26.3 billion tumble in March. Nonrevolving credit in April fell -$10.5 billion following the $14.7 billion rise in March.

Baker-Hughes reported the U.S. rig count was down 17 rigs to 284 with oil rigs lower by 16 to 206, gas rigs down 1 to 76, and miscellaneous rigs unchanged at 2. The U.S. Rig Count is down 691 rigs from last year’s count of 975, with oil rigs declining 583, gas rigs down 110, and miscellaneous rigs up 2 to 2. The U.S. Offshore Rig Count was up 1 to 13 and down 10 year-over-year. 

The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 5th-straight session after plummeting to an intraday low of $153.16. Prior and upper support from mid-March at $153.50-$153 was breached but held. A close below the latter would signal additional weakness towards $152-$151.50.

Lowered resistance is at $156.50-$157 followed by $158-$158.50.

RSI remains in a downtrend with key support at 30 holding. A close below this level would suggest additional weakness towards 25-20 and prior levels from October 2018. Resistance is at 35-40.

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The S&P 500 Volatility Index ($VIX) was down for the 3rd time in 4 sessions with the morning low tapping 23.54. Late February support at 24.50-24 was breached but levels that held on the close back below and the 200-day moving average. A close below 23.50 would signal additional weakness towards 22.50-22.

Lowered resistance is at 25-25.50 followed by 26.50-27.

RSI remains in a downtrend with key support and the May low at 35 holding. A close below this level would signal additional weakness towards 30 and a level last seen in March 2016.

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The S&P 400 Mid Cap Index ($MID) was up for the 5th-straight session following the intraday run to 1,939. Prior resistance from late February at 1,925-1,950 was breached but held. Continued closes above the latter would be an ongoing bullish signal for a retest towards 1,975-2,000.

New support is at 1,900-1,875 with backup help at 1,850-1,825 and the 200-day moving average.

RSI remains in an uptrend after clearing key resistance at 70. Continued closes above this level would signal additional strength towards 75-80 and the highs from February 2019. Support is at 65-60.

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The Dow Jones Transportation Average ($TRAN) extended its winning streak to 4-straight sessions after testing a 1st half high of 10,075. Longer-term and lower resistance from early February at 10,000-10,100 was cleared but held. A close above the latter would signal additional momentum towards 10,300-10,400.

Current and rising support at 9,900-9,800. A close below the latter and the 200-day moving average would signal a false breakout with backtest potential towards 9,600-9,500.

RSI remains in an uptrend with key resistance at 75 holding. Continued closes above this level would signal additional strength towards 80-85 and overbought levels from January 2018. Support is at 70.

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The percentage of Nasdaq 100 stocks trading above the 50-day moving

closed at 95.14% on Friday, down 0.97%. Current and upper support at 95%-92.5% was breached but held. A close below the latter reopens downside risk towards 90%-87.5%. Overbought levels and near-term resistance is at 97.5%-100% with the latter representing the peak from the prior week. A move above the 100% level would signal strength towards 102.5%-105%.

The percentage of S&P 500 stocks trading above the 200-day moving average settled at 55.64%, up 7.53%. The gap higher cleared and held lower resistance at 55%-60% and prior support from mid-February. A close above the latter would signal additional strength towards 62.5%-65%. Support is at 52.5%-50%.

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

Momentum Options Play List

Closed Momentum Options Trades for 2020: 20-6 (77%). 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.

Dropbox (DBX, $21.98, down $1.30)

DBX July 25 calls (DBX200717C00025000, $0.30, down $0.25)

Entry Price: $0.55 (6/4/2020)

Exit Target: $1.10

Return: -44%

Stop Target: None

Action: Friday’s low tapped $21.68 with prior and upper support at $21.75-$21.50 getting breached but holding. Lowered resistance is at $22.25-$22.50.

While I was hoping for a breakout, there could be further weakness towards $21.50-$21. These are longer-term options so obviously there is plenty of time for the trade to play out. 

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Tilray (TLRY, $9.48, down $0.61)

TLRY September 11 calls (TLRY200918C00011000, $0.85, down $0.15)

Entry Price: $1.00 (6/3/2020)

Exit Target: $2.00

Return: -15%

Stop Target: 50 cents

Action: Friday’s pullback tapped $9.08 with upper support at $9.25-$9 getting tripped but holding. Lowered resistance is at $9.75-$10.

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Freeport McMoRan (FCX, $10.86, up $0.66)

FCX June 10 calls (FCX200619C00010000, $1.00, up $0.45)

Entry Price: $0.40 (5/19/2020)

Exit Target: $1.60 (closed half at $1.20 on 6/5/2020)

Return: 175%

Stop Target: 90 cents (Stop Limit)

Action: Friday’s peak reached $11.19 with fresh and lower resistance at $11.10-$11.20 getting breached but holding. New support is at $10.70-$10.60.

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Limelight Networks (LLNW, $4.70, up $0.01)

LLNW June 5 calls (LLNW200619C00005000, $0.20, down $0.05)

Entry Price: $0.60 (5/6/2020)

Exit Target: $1.20 

Return: -67%

Stop Target: None

Action: Prior and upper support at $4.50-$4.40 and the 200-day moving average held on the backtest to $4.44. Resistance remains at $4.80-$4.90 on the rebound and slightly positive close.

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