MomentumOptions.com Pre-Market Update for 6/30/2020

Bulls Rebound but Outlook Remains Cloudy

8:00am (EST) 

The market rebounded to start the shortened holiday week as better-than-expected economic news outweighed ongoing coronavirus concerns. The gains helped keep 3-week trading ranges intact while pushing the major indexes back into positive territory for the month. 

Volume was below average and comes with just one trading day left in June. Meanwhile, volatility was heightened on the open but held key resistance before settling lower.

The Russell 2000 showed the most strength after zooming 3.1% with the midday peak reaching 1,427. Current and lower resistance at 1,420-1,435 was cleared and held with a close above the latter suggesting additional upside towards 1,450-1,465.

The Dow added 2.3% with the late day high tagging 25,601. Fresh and lower resistance  at 25,500-25,750 was recovered with a close above the latter signaling a retest towards 26,000-26,250.

The S&P 500 was higher by 1.5% after closing on its session peak of 3,053. New and lower resistance at 3,050-3,075 was cleared and held with a close above the latter getting 3,100-3,125 back in focus.

The Nasdaq gained 1.2% after tapping a 2nd-half high of 9,877. Near-term and lower resistance at 9,800-9,900 was breached and held with a move above the latter suggesting additional strength towards 10,000-10,100.

Industrials were the strongest sector after surging 3.3% while Materials and Consumer Staples advanced 2% and 1.9%, respectively. There was no sector weakness.

In economic news, Pending Home Sales surged a record 44.3% to 99.6 in May following the -21.8% April plunge to a historic low of 69. Expectations were for a rise of 11.3% for the month. Compared to last year, the index is at a -10.4% year-over-year contraction rate, improving from the -34.6% pace from April which was also a record low. Gains were across all four regions, led by the West (56.2%) and the Northeast (44.4%).

Dallas Fed Manufacturing Survey jumped another 43.1 points to -6.1 in June after rebounding 24.8 points to -49.2 in May. The employment component rose to -1.5 from -11.5. The workweek index increased to -4.3 from -22.8 previously, with wages and benefits climbing to 6.8 versus -0.2. New orders surged to 2.9 from -30.6 in May. Prices paid climbed to 12.3 from 2.5, with prices received rising to -4.7 from -19.4. The 6-month outlook index jumped to 19.7 from the prior -19 reading. The future employment gauge bounced back to 18.6 from -3.5, with new orders at 33.9 from 17.8. Prices paid dipped to 19.4 from 21.9, with prices received at 7.7 from 4.8. Capex turned around to 10.4 versus -7.7 previously.

San Fransisco Fed Mary Daly believes the economy is behaving in accordance with expectations of a gradual recovery. However, she added it is not clear that the economy is out of the woods yet, in terms of the pandemic, and it is too soon to know if the economy is opening up too early and whether more fiscal aid will be needed. 

In terms of Fed support, Daly said the markets were calmed by the announcement effects and so far, the emergency lending efforts have been modest. She is on the very cautious side, worrying that growth may not post positive growth again until 2021, in contrast to other Fed officials who are forecasting a pickup in the back half of 2020.

The iShares 20+ Year Treasury Bond ETF (TLT) had its 3-session winning streak snapped following the intraday pullback to $164.38. Prior and upper support at $164.50-$164 was breached but held. A close below the latter and the 50-day moving average would suggest a further backtest towards $162.50-$162.

Resistance is at $165.50-$166 followed by $167-$167.50.

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The S&P 500 Volatility Index ($VIX) traded to a higher high on the open with the peak reaching 36.31. Current and lower resistance at 36.50-37 was challenged but held for the 2nd-straight session. A close above the 37.50 level would be a renewed bearish development with upside risk towards 40-42.50.

The fade to 32.69 afterwards challenged but held upper support at 32.50-32. A close below the latter and the 50-day moving average would be a more bullish signal for the market with further backtest potential towards 30.50-30.

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The Russell 2000 ETF (IWM) zigzagged for the 5th-straight session after trading to an intraday high of $141.99. Lower resistance at $142-$142.50 was challenged but held. A move above the latter would signal a possible retest towards $145-$145.50 and the 200-day moving average. 

Near-term but shaky support is at $140-$139.50 followed by $137.50-$137.

RSI is back in a slight uptrend after clearing and holding key resistance at 50. Continued closes above this would signal additional strength towards 55-60 with the latter holding for the past few weeks. Support is at 45-40.

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The Consumer Staples Select Spiders (XLP) was up for just the 2nd time in 7 sessions with the high tapping $58.32. Near-term resistance at $58-$58.50 was recovered / cleared but held?  A close above the latter and the 50-day moving average would be a slightly bullish signal for additional strength towards $59.50-$60.

Current support is at $57.50-$57. A close below the latter would be a slightly bearish development with additional pullback potential towards $56.50-$56 and fresh monthly lows.

RSI rebounded with key resistance at 50 holding. A move above this level and would suggest additional strength towards 55-60. Support is at 45-40 with the latter representing the monthly low.

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The current environment remains choppy with trading ranges in place. I have warned this is not the best time to make money and I was hoping to see the 2 trades from Friday show some follow thru yesterday. 

With a 3-day holiday weekend coming up, and the “official” start to 2Q earnings season starting another week afterwards, the lackluster will likely continue. 

The good news is July is setting up to be explosive so hopefully our older positions can rebound. The new trades from Friday traded lower but I expect them to winners.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 22-6 (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.

Spider Gold Shares (GLD, $166.63, up $0.09)

GLD July 172 calls (GLD200717C00172000, $0.70, down $0.32)

Entry Price: $0.97 (6/26/2020)

Exit Target: $2.00

Return: -26%

Stop Target: None

Action: Shares topped out at $166.80 with current and lower resistance at $167-$167.50 getting challenged but holding. Continued closes above the latter would suggest a run towards $168-$170.

Support remains at $166-$165.50 followed by $164.50-$164.

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Momo (MOMO, $17.50, up $0.71)

MOMO July 16.50 puts (MOMO200717P00016500, $0.60, down $0.30)

Entry Price: $0.70 (6/26/2020)

Exit Target: $1.40

Return: -14%

Stop Target: None

Action: Shares rebounded to test a session high of $17.51 with fresh and lower resistance at $17.50-$17.75 getting cleared and holding. Shaky support is at $17.25-$17.

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AT&T (T, $29.91, up $0.83)

T July 32 calls (T200717C00032000, $0.15, flat)

Entry Price: $0.67 (6/16/2020)

Exit Target: $1.35

Return: -78%

Stop Target: None

Action: Lower resistance at $29.75-$30 was cleared and held on yesterday’s trip to $29.93. Support is at $29.50-$29.25.

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Dropbox (DBX, $21.29, down $0.18)

DBX July 25 calls (DBX200717C00025000, $0.10, down $0.05)

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

Exit Target: $1.10

Return: -81%

Stop Target: None

Action: Shares hit a low of $20.58 with prior and upper support at $20.50-$20.25 getting challenged but holding. If shares fall below $20, we will exit the trade. Lowered resistance is at $21.50-$21.75.

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Tilray (TLRY, $7.71, down $0.24)

TLRY September 11 calls (TLRY200918C00011000, $0.55, down $0.15)

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

Exit Target: $2.00

Return: -45%

Stop Target: 50 cents

Action: Monday’s low reached $7.56 with prior and upper support at $7.75-$7.50 failing to hold. Lowered resistance is at $8-$8.25.

We could close this trade to save the remaining premium over the next day or so as shares have broken out of their trading range. I would like to see a close back above $8 today.

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