MomentumOptions.com Pre-Market Update for 7/22/2020
Tech Taps Record High But Gives Up Gains
The market showed overall strength for the 3rd-straight session following more good news on the coronavirus vaccine front and ongoing stimulus talks. Better-than-expected earnings also helped sentiment with Tech setting a new all-time high on the open.
The Nasdaq gains faded quickly afterwards with the other major indexes holding positive territory throughout the session. Overbought levels remain in play for Tech, but the overall gains remain a bullish development as multi-month highs come back into play.
The Russell 2000 rebounded 1.3% to close higher for the 2nd time in 3 sessions after tagging a morning high of 1,496. Lower resistance from early June at 1,485-1,500 was cleared and held with a move above the latter suggesting continued momentum towards 1,510-1,525.
The Dow gained 0.6% with the first half peak hitting 27,025. Near-term and lower resistance from last week at 26,750-27,000 was recovered with a close above the latter getting 27,250-27,500 back in focus.
The S&P 500 was higher by 0.2% following the midday run to 3,277. Lower resistance at 3,275-3,300 was cleared but held with a close above the latter signaling a retest towards 3,325-3,350 and levels from late January.
The Nasdaq fell 0.8% despite trading to an opening and fresh all-time high of 10,839. Prior and lower resistance at 10,800-10,900 was cleared but held with a move above the latter suggesting additional upside towards 11,000-11,100. The fade to 10,650 afterwards easily held near-term and upper support at 10,600-10,500.
Utilities showed the most sector strength after zooming 6% while Financials and Industrials surged 2% and 1.3%. Technology and Communication Services paced sector laggards after giving back 1% and 0.5%, respectively.
In economic news, Chicago Fed National Activity Index rose 0.61 points to 4.11 in June, after bouncing 21.6 points to 3.50 in May. The 3-month moving average improved to -3.49 from -6.36. Strength from the index was led by improvements in the production and employment related indicators. Of the 85 indicators that make up the index, 54 made positive contributions with the remaining 31 accounting for negative contributions.
Chain Store Sales edged up 0.4%, following the prior week’s -1.2% drop. The 12-month contraction rate slowed to -8.9% year-over-year from -9.8%, previously. Discretionary spending picked up slightly on items such as furniture and home improvement versus other retail segments.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session with the midday high hitting $167.72. Current and lower resistance at $167.50-$168 was cleared but held. A move above the latter would suggest additional strength towards $169.50-$170.
Support remains at $167-$166.50 with backup help at $165.50-$165 and the lower end of the current trading range.
The S&P 500 Volatility Index ($VIX) was up for the first time in 3 sessions despite tapping a fresh monthly low of 23.61. Prior and upper support from early June at 24-23.50 was breached but held. A close below the latter and the June low at 23.54 would signal additional weakness towards 22.50-22.
The bounce to 25.65 afterwards cleared resistance at 25-25.50 but levels that held. A close above the latter would suggest a retest towards 26.50-27 and the 200-day moving average.
The Invesco QQQ Trust (QQQ) had its 2-session winning streak snapped despite trading to an opening high of $268.41. Current and lower resistance at $268-$268.50 was breached but held. A close above the latter would signal additional strength towards $269.50-$270 with the current all-time peak at $269.79.
Current and rising support is at $263.50-$263 following the fade to $263.12 afterwards. A close below the $262.50 level would likely signal a further backtest towards $260.50-$260.
RSI has flatlined after failing lower resistance at 70-75 with the latter representing the monthly and early June top. A move above 75 would signal additional strength towards 80 and the January top. Support is at 60-55.
The Real Estate Select Sector Spider (XLRE) remains in an 11-session trading range after topping out at $35.07 shortly after the open. Near-term and lower resistance at $35-$35.25 was tripped but held. A close above the latter would signal the start of a possible breakout with more important hurdles at $35.75-$36 and the 200-day moving average.
Near-term support is at $34.50-$34.25 and the 50-day moving average. A close below the latter would be a slightly bearish development with additional downside risk towards $34-$33.75.
RSI remains consolidated since late June with key support at 45 holding. A close below this level would signal additional weakness towards 40 and the mid-May low. Resistance is at 50 with a move above this level signaling additional strength towards 55-60.
I wanted to get us into iShares MSCI Emerging Markets Fund (EEM, $43.72, up $0.40) but the ETF gapped higher on Tuesday’s open. I covered a possible breakout in Monday’s update but I want to see if there is some follow thru today. RSI needs to clear and hold 70, as well. If so, I could have a new trade on EEM.
In the meantime, let’s go check our current positions.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 24-8 (75%). 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.
Cisco Systems (CSCO, $47.02, up $0.05)
CSCO August 50 calls (CSCO200821C00050000, $0.60, unchanged)
Entry Price: $0.65 (7/21/2020)
Exit Target: $1.30
Stop Target: None
Action: Tuesday’s peak reached $47.33 with lower support at $47-$47.50 getting cleared and holding. Rising support is at $46.75-$46.25.
Viavi Solutions (VIAV, $13.44, unchanged)
VIAV August 14 calls (VIAV200821C00014000, $0.60, flat)
Entry Price: $0.60 (7/13/2020)
Exit Target: $1.20
Stop Target: None
Action: Lower resistance at $13.50-$13.75 and the 200-day moving average were cleared but levels that held with the first half high reaching $13.80. Support remains at $13.25-$13.