MomentumOptions.com Pre-Market Update for 6/23/2020
Nasdaq Stays Strong, Extends Winning Streak to 7-Straight
The market opened lower to start Monday’s action as Wall Street debated over the economy’s recovery on more reopenings in key states like New York and New Jersey versus concerns over the coronavirus spreading in others. The major indexes got a midday lift following news a second round of stimulus relief could be coming.
White House economic adviser Larry Kudlow said that while discussion of a second stimulus package round is very likely, it won’t be until after July and will focus on businesses rather than individuals. The positive close kept the market in a tight trading range with only 6 trading days remaining before the second quarter officially closes.
The Nasdaq was up for the 7th-straight session after gaining 1.1% with the intraday high tapping 10,059. Current and lower resistance at 10,050-10,150 was cleared and held with a move above the latter and the current all-time high at 10,086 signaling additional momentum towards 10,200-10,300.
The Russell 2000 also rose 1.1% while settling on its session peak of 1,433. Prior and lower resistance at 1,425-1,440 was recovered with a close above the latter likely leading to a retest towards 1,450-1,465.
The S&P 500 advanced 0.7% following the afternoon trip to 3,120. Near-term and lower resistance at 3,100-3,125 was cleared and held with a close above the latter signaling additional strength towards 3,150-3,175.
The Dow snapped a 3-session slide after adding 0.6% while tagging a 2nd-half high of 26,059. Fresh and lower resistance at 26,000-26,250 was recovered with a move above the latter and the 200-day moving average setting up another run towards 26,500-26,750.
Technology led sector strength after rallying 1.9% while Utilities and Consumer Discretionary were higher by 1%. Financials and Healthcare were the weakest sectors after giving back 0.5% and 0.4%, respectively.
In economic news, Chicago Fed National Activity Index jumped 20.5 points to 2.6 in May after dropping -22.6 points to a record low of -17.9 in April. Expectations were for a print of -4. The 3-month moving average improved to -6.7 from -7.5 in April. Supporting the rebound were improvements in the production and employment-related indicators. The report also showed that 57 of the 85 indicators made positive contributions, with 28 making negative contributions.
Existing Home Sales fell 9.7% to 3,910,000 in May, much weaker than forecasts of 4,290,000, and follows the -17.8% plunge to 4,330,000 in April. This represented the 3rd-straight decline in sales and is the lowest pace in nearly 10 years. Both components weakened with single family sales declining -9.4%, while condo/coop sales tumbled -12.8%. Analysts suspect condo/coop sales could remain soft in the future due to social distancing. Given the weakness in sales, the months’ supply rose to 4.8 from 4. The median sales price dipped to $284,600 from $286,700 previously.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 4th-straight session after trading to a morning high of $163.42. Prior and lower resistance from mid-month at $163-$163.50 was cleared but held. A close above the latter would signal additional strength towards $164-$164.50 and the 50-day moving average.
Rising support is at $162-$161.50 followed by $160.50-$160.
The S&P 500 Volatility Index ($VIX) has formed a 5-session trading range following the late day pullback to 31.64. Current and upper support at 33-32.50 and the 50-day moving average were breached and failed to hold. This was a slightly bullish signal for the market. A close below the 31.50 level would signal another retest towards 30.50-30.
Resistance remains at 34.50-35. A move above the latter and the top of the current range would signal additional strength towards 36.50-37.
The Spiders Dow Jones Industrial Average ETF (DIA) snapped a 3-session losing streak after testing a late day peak of $260.58. Lower resistance at $260.50-$261 and the 200-day moving average were cleared but levels that held. A close above the latter would signal additional strength towards $262-$262.50
Near-term and upper support is at $257-$256.50. A close below the latter would signal additional weakness towards $255.50-$255.
RSI is trying to curl higher after holding key support at 50. A close below this level would signal additional downside risk towards 45-40 with the latter representing the early April low. Resistance is at 55-60.
The Industrials Select Sector Spider (XLI) snapped a 3-session losing streak despite tagging a first half low of $67.94. Current and upper support at $68-$67.50 held. A close below the latter reopens additional downside risk towards $66.50-$66 with the monthly low at $66.36.
Lower resistance at $69.50-$70 held on the rebound to $69.26 with more important hurdles at $72.50-$73 and the 200-day moving average.
RSI is trying to level out with crucial support at 50 holding. A move below this level would signal weakness towards 45-40 and the latter representing the mid-May low. Resistance is at 55.
I have updated our current trades, including our latest GLD position, so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 21-6 (78%). 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.
Spider Gold Shares (GLD, $165.09, up $1.06)
GLD July 170 calls (GLD200717C00170000, $1.35, up $0.20)
Entry Price: $1.35 (6/22/2020)
Exit Target: $2.70
Stop Target: 60 cents
Action: Monday’s fresh all-time high reached $165.73 with unchartered territory and lower resistance at $165.50-$166 getting cleared but holding. A close above the latter could lead to a continued breakout towards $167.50-$170 over the near-term. New support is at $164-$163.50.
AT&T (T, $30.11, down $0.20)
T July 32 calls (T200717C00032000, $0.35, down $0.09)
Entry Price: $0.67 (6/16/2020)
Exit Target: $1.35
Stop Target: None
Action: New and upper support at $30-$29.75 was kissed but held on yesterday’s low. Lowered resistance at $30.25-$30.50 and the 50-day moving average.
Dropbox (DBX, $23.52, up $0.21)
DBX July 25 calls (DBX200717C00025000, $0.55, up $0.05)
Entry Price: $0.55 (6/4/2020)
Exit Target: $1.10
Stop Target: None
Action: Monday’s peak reached $23.65 with fresh and lower resistance at $23.50-$23.75 getting cleared and holding. Rising support is at $23.25-$23.
Tilray (TLRY, $8.41, up $0.11)
TLRY September 11 calls (TLRY200918C00011000, $0.70, unchanged)
Entry Price: $1.00 (6/3/2020)
Exit Target: $2.00
Stop Target: 50 cents
Action: Lower resistance at $8.50-$8.75 was challenged on Monday’s rebound to $8.49. Support is at $8.25-$8 and the 50-day moving average.