MomentumOptions.com Pre-Market Update for 7/24/2020
Late Day Weakness Weighs on Market
The market struggled throughout Thursday’s session following slightly disappointing economic news concerning employment and leading indicators. This offset some of the good news concerning a 5th coronavirus relief package after The White House and Republicans have reportedly come to an agreement.
This clears the way for negotiations with Democrats over the proposed $1 trillion spending package as both side race to reach a deal before the expiration of enhanced unemployment benefits. The mostly lower closes pushed volatility higher but not to an alarming level as near-term resistance levels held.
The Nasdaq was the weakness index after tumbling 2.3% with the afternoon low tagging 10,407. Current and upper support at 10,500-10,400 was tripped and failed to hold with a move below the latter setting up a further pullback towards 10,300-10,200.
The Dow remains in a 7-session trading range after falling 1.3% with the late day low reaching 26,560. Upper support at 26,750-26,500 failed to hold with a move below the latter signaling additional weakness towards 26,250-26,000 and the 200-day moving average.
The S&P 500 had its 4-session winning streak snapped after giving back 1.2% while testing an intraday low of 3,222. Near-term and upper support at 3,250-3,225 was breached and failed to hold with a close below the latter indicating a further backtest towards 3,200-3,175.
The Russell 2000 showed strength for much of the session after testing a morning peak of 1,507 but was up less than a tenth-point, or 0.0%, on the close. Near-term and lower resistance at 1,500-1,515 was cleared but held for the 3rd-straight session with a close above the latter signaling additional strength towards 1,525-1,540.
Consumer Staples led sector strength after adding 0.4% while Utilities and Financials gained of 0.1% to round out the winners. Technology and Communication Services were the weakest performers after dropping 2.6% and 1.6%, respectively.
In economic news< Initial Jobless Claims rose 109,000 to 1,416,000, missing estimates of 1,308,000 for a 16th-straight decline. The uptick follows the -3,000 slide to 1,307,000 in the prior week. The 4-week moving average slipped to 1,360,250 from 1,376,750. Continuing claims declined -1,107,000 to 16,197,000, the 8th straight weekly decline, following the -456,000 drop to 17,304,000 previously.
Leading Indicators index climbed 2% to 102 in June after surging 3.2% to 100 in May. Expectations were for a rise of 2.5%. Most of the 10 components made positive contributions, led by jobless claims (1.35%), the average workweek (0.42%), and stock prices (0.24%). The small and negative contributions came from the leading credit index (-0.08%), consumer goods orders (-0.05%), and consumer expectations (-0.02%).
Kansas City Fed Manufacturing Index for July came in at 3 versus forecasts of 5.
The iShares 20+ Year Treasury Bond ETF (TLT) extended its winning streak to 4-straight sessions after breaking out of a 9-session trading range while tapping a high of $169.88 ahead of the closing bell. Prior and lower resistance from mid-April at $169.50-$170 was recovered. A close above the latter would signal additional momentum towards $171-$171.50.
Rising support is at $169-$168.50 followed by $167.50-$167.
The S&P 500 Volatility Index ($VIX) rebounded to settle higher for the 2nd time in 3 sessions after reaching an afternoon peak of 26.95. Current and lower resistance at 26.50-27 was breached but held. A close above the latter and the the 200-day moving average would suggest further upside towards 29.50-30 and the 50-day moving average.
Support is at 25.50-25 followed by 24-23.50 with the opening and fresh monthly low hitting 23.60.
The S&P 400 Mid Cap Index ($MID) extended its winning streak to 3-straight after tapping an intraday high of 1,886. Lower resistance from early June at 1,875-1,900 was cleared but held. A close above the latter would signal a retest towards 1,925-1,950 with the June peak at 1,946.
The fade to 1850 late in the day clipped upper support at 1,850-1,825 but a level that held. A close below the latter and the 200-day moving average would signal a near-term top with additional weakness towards 1,800-1,775 and the 50-day moving average.
RSI has leveled out with lower resistance from late May at 65-70 holding. Key support is at 60 with a close below this level signaling additional weakness towards 55-50.
The Consumer Staples Select Spiders (XLP) also closed higher for the 3rd-straight day with the midday peak hitting $62.46. Lower resistance from early March at $62-$62.50 was recovered. A close above the latter would be an ongoing bullish signal for additional strength towards $63.50-$64.
Current and rising support is at $61.50-$61. A close below the latter would be a slightly bearish development and signal a possible near-term top with additional pullback potential towards $60-$59.50 and the 200-day moving average.
RSI is in an uptrend with key resistance from early June at 70 holding. A move above this level and would suggest additional strength towards 75 and the January peak. Support is at 65-60.
I have updated our current trades so let’s go check the tape.
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, $47.41, up $0.51)
CSCO August 50 calls (CSCO200821C00050000, $0.65, up $0.10)
Entry Price: $0.65 (7/21/2020)
Exit Target: $1.30
Stop Target: None
Action: Thursday’s peak reached $47.70 with lower resistance at $47.50-$48 getting cleared and holding. Support is at $47.25-$47.
Viavi Solutions (VIAV, $13.64, up $0.17)
VIAV August 14 calls (VIAV200821C00014000, $0.65, up $0.05)
Entry Price: $0.60 (7/13/2020)
Exit Target: $1.20
Stop Target: None
Action: Thursday’s high reached $13.74 with lower resistance at $13.50-$13.75 and the 200-day moving average getting cleared and holding. Support remains at $13.25-$13.