MomentumOptions.com Pre-Market Update for 7/1/2020

Nasdaq Recovers 10,000 Level/ Trade Alert (TLRY)

8:00am (EST) 

The market opened slightly lower to start Tuesday’s session as mixed economic news weighed on sentiment. The losses were quickly recovered with tight trading ranges and consolidation forming afterwards as Wall Street awaited comments from Treasury Secretary Mnuchin and Fed Chairman Powell’s testimony to Congress.

There was nothing alarming in their statements with Mnuchin talking about repurposing leftover PPP money and Powell focused on the economy. The major indexes extended their gains afterwards while wrapping up a solid 2nd quarter for the bulls that represented the best quarter for the market in over 2 decades.

The Nasdaq advanced 1.9% after tagging a high of 10,085 ahead of the closing bell. Lower resistance from last week at 10,000-10,100 was cleared and held with a move above the latter getting 10,200-10,300 and fresh all-time highs back in focus.

The Russell 2000 rallied 1.4% with the intraday peak reaching 1,444. Prior and lower resistance at 1,435-1,450 was recovered with a close above the latter signaling additional strength towards 1,460-1,475 and the 200-day moving average.

The S&P 500 gained 1.5% following the late day trip to 3,111. Near-term and lower resistance at 3,100-3,125 was breached and held with a move above the latter suggesting additional upside towards 3,150-3,175.

The Dow was up 0.9% after tagging a session high of 25,905. Short-term and lower resistance at 25,750-26,000 was cleared and held with a move above the latter signaling a retest towards 26,250-26,500 and the 200-day moving average.

For the month, the Nasdaq sky-rocketed 30.6% and the Russell 2000 surged 20.4%. The S&P 500 soared 19.9% and the Dow zoomed 17.8%.

Energy was the strongest sector after popping 2.3% while Technology and Healthcare rose 1.8% and 1.7%, respectively. There was no sector weakness.

Over the past 30 days, Technology (+4.8%); Consumer Discretionary (+1.5%); and Industrials (1%) showed the most sector strength. Utilities (-5.8%); Energy and Healthcare (-4.5%); and Financials (-2.5%) were the weakest sectors.

In economic news, S&P Corelogic Case-Shiller 20-City home price index rose 0.9% to 224.1 in April, after jumping 1.1% to 222.2 in March. The index accelerated slightly to a 12-month pace of 4% year-over-year versus 3.9% previously. The 10-City index rose 0.8% to 236.6 following March’s 1.1% gain to 234.8, and represents a 3.4% year-over-year clip, the same as in March. All 20 cities posted 12-month gains, and were led by Phoenix (8.8%) and Seattle (7.3%), with Chicago (1.4%) and New York (2.5%) bringing up the rear.

Chicago PMI rose 4.3 points to 36.6 in June, weaker than forecasts of 44.5, after falling -3.1 points to 32.3 in May. The 3-month moving averaged dipped to 34.8, however, from 38.5, and is down from 46.6 in March.

Consumer Confidence surged 12.2 points to 98.1 in June, topping expectations for a print of 90, after edging up 0.2 points to 85.9 in May. Both components improved measurably as the present situation index climbed to 86.2 from 68.4 in May while the expectations index jumped to 106 from 97.6. The labor differential improved to -3 from -12.7. The 12-month inflation index rose to 6.7% versus 6.4%.

Fed Chairman Jerome Powell reiterated that the path for the economy is extraordinarily uncertain and much will depend on containing the virus. He added a full recovery is unlikely until people are confident that it is safe to reengage in a broad range of activities.

Powell noted that the economy’s bounce back has been sooner than expected, though said there will be challenges in keeping the virus in check amid the reopenings. He concluded the testimony by reiterating that the Fed is committed to using its full range of tools to support the economy and to help assure that the recovery from this difficult period will be as robust as possible.

New York Fed John Williams said the fate of the economy is inextricably linked to the path of the coronavirus. He believes the encouraging data and the reopening of states indicated we have hit the lows for the economy. However, he warned that the outlook is highly uncertain, consistent with the other Fed member views. 

Williams went on to say it is going to take considerable time before the economy is restored to its full potential and will depend on containing the virus risks. He is also committed to using all the Fed’s tools to support the recovery while adding future action will depend on the economy and the outlook on the virus.

The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session following the intraday pullback to $163.48. Near-term and upper support at $163.50-$163 and the 50-day moving average were tripped but levels that held. A close back below the latter would signal additional weakness towards $162-$161.50.

Lowered resistance is at $164.50-$165 followed by $166-$166.50.

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The S&P 500 Volatility Index ($VIX) extended its losing streak to 2-straight sessions with the afternoon low reaching 29.56. Near-term and upper support at 30-29.50 was breached but held. A close below the latter would be an ongoing bullish signal for the market with additional weakness towards 28.50-28.

Lowered resistance is at 31.50-32 and the 50-day moving average.

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The S&P 400 Mid Cap Index ($MID) was up for the 3rd time in 4 sessions after tagging an intraday high of 1,788. Lower resistance at 1,775-1,800 was was cleared and held. A close above the latter would signal a retest towards 1,825-1,850 and the 200-day moving average.

Current support is at 1,750-1,725 with backup help at 1,700 and the 50-day moving average.

RSI is in a slight uptrend after clearing and holding lower resistance at 50-55. Continued closes above this level would suggest additional strength towards 60-65. Support is at 45-40 with the latter representing the early April low.

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The Dow Jones Transportation Average ($TRAN) extended its winning streak to 2-straight sessions after testing an afternoon high of 9,219. Current and lower resistance at 9,150-9,250 was breached and held. A close above the latter would suggest additional upside towards 9,400-9,500.

Short-term support is at 9,000-8,900. A close below the latter would signal additional weakness with backtest potential towards 8,800-8,700 and the 50-day moving average.

RSI is in an uptrend with key resistance at 55 in play. A close above this level would signal additional strength towards 60-65. Support is at 50-45 with the latter representing the monthly low.

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

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, $167.37, up $0.74)

GLD July 172 calls (GLD200717C00172000, $0.90, up $0.20)

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

Exit Target: $2.00

Return: -8%

Stop Target: None

Action: Tuesday’s fresh 52-week high tapped $167.99 with longer-term and lower resistance at $168-$168.50 getting challenged but holding. Continued closes above the latter would suggest a run towards $170.

Rising support is at $167-$166.50 followed by $165.50-$165.

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Momo (MOMO, $17.48, down $0.02)

MOMO July 16.50 puts (MOMO200717P00016500, $0.60, flat)

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

Exit Target: $1.40

Return: -14%

Stop Target: None

Action: Upper support is at $17.25-$17 was breached but held on the fade to $17.09 yesterday. Current resistance at $17.75-$18.

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AT&T (T, $30.23, up $0.32)

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 $30.25-$30.50 was cleared but held with yesterday’s peak reaching $30.34. Support is at $30-$29.75.

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Dropbox (DBX, $21.77, up $0.48)

DBX July 25 calls (DBX200717C00025000, $0.15, up $0.05)

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

Exit Target: $1.10

Return: -72%

Stop Target: None

Action: Lower resistance at $21.75-$21.50 was cleared and held on Tuesday’s rebound to $21.82. Support is at $21.50-$21.25.

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Tilray (TLRY, $7.11, down $0.60)

TLRY September 11 calls (TLRY200918C00011000, $0.35, down $0.20)

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

Exit Target: $2.00

Return: -65%

Stop Target: 50 cents

Action: Close the trade today to save the remaining premium.

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