MomentumOptions.com Pre-Market Update for 7/28/2020
Bulls Snap 2-Session Slide
The market showed overall strength for the first time in 3 sessions on hopes the government can deliver another stimulus package before the end of the week. The rising number of new virus infections and U.S./ China tensions were offset by positive news concerning a Phase 3 trial for coronavirus with a vaccine hopeful by yearend. The gains come ahead of the biggest week for 2Q earnings with volatility settling lower for the 2nd-straight session.
The Nasdaq jumped 1.7% with the afternoon peak reaching 10,546. Prior and lower resistance at 10,500-10,600 was reclaimed with a move above the latter suggesting strength towards 10,700-10,800.
The Russell 2000 rose 1.2% to close on its session high of 1,484. Near-term and lower resistance at 1,470-1,485 was cleared and held with a move above the latter indicating additional upside towards 1,500-1,515.
The S&P 500 gained 0.7% after tagging an intraday high of 3,241. Lower resistance at 3,225-3,250 was tripped and held with a close above the latter signaling a retest towards 3,275-3,300.
The Dow climbed 0.4% with the first half peak hitting 26,625. Current and lower resistance at 26,500-26,750 was recovered with a move above the latter suggesting a retest 27,000-27,250.
Technology showed the most sector strength after soaring 1.6% while Materials and Real Estate were higher by 1.5% and 1.2%. Financials and Utilities and Financials were the only sectors that settled lower after falling 1.2% and 0.8%, respectively.
In economic news, Durable Goods Orders rose 7.3% in June, versus forecasts for a rise of 6.5%, following a 15.1% bounce in May. Transportation orders remained supportive, climbing 20% after the 78.9% surge in May. Excluding transportation, orders were up 3.3% from 3.6%. Non-defense capital goods orders excluding aircraft increased 3.3% from the 1.6% May gain. Shipments jumped 14.9% from the prior 4.2% gain. Non-defense capital goods shipments excluding aircraft climbed 3.4% from 1.6% previously. Inventories edged up 0.1% from unchanged. The inventory-shipment ratio dropped to 1.87 from 2.15.
Dallas Fed Manufacturing Business Index rose 3.1 points to -3 in July, after surging 43.1 points to -6.1 in June. The employment component improved to 3.1 from -1.5, with the workweek bouncing to 5.8 from -4.3. New orders increased to 6.9 from 2.9. Prices paid slipped to 9.7 from 12.3, with prices received rising to -1.5 from -4.7. The 6-month general business activity index dropped to 10.6 from 19.7. The future employment index fell to 11.1 from 18.6, with new orders at 38.6 from 33.9. Prices paid firmed to 22.3 from 19.4, with prices received at 10.9 from 7.7. Capex inched up to 11.6 from 10.4.
The iShares 20+ Year Treasury Bond ETF (TLT) fell for the 2nd-straight session despite trading to an intraday high of $170.30. Prior and lower resistance from mid-April at $170-$170.50 was cleared but held. A close above the latter would indicate additional upside towards $171.50-$172 with the April peak at $172.15.
The drop to $168.99 breached but held upper support at $169-$168.50 with backup help at $167.50-$167.
The S&P 500 Volatility Index ($VIX) tapped an opening high of 26.94 before closing lower for the 2nd-straight session. Current and lower resistance at 27-27.50 and the 200-day moving average was challenged but held.
The backtest to 24.55 pushed current and upper support at 24.50-24 but a level that held.
The Spiders Dow Jones Industrial Average ETF (DIA) was up for the first time in 3 sessions after testing an intraday peak of $266.31. Near-term and lower resistance at $266-$266.50 was cleared but held. A close above the latter would indicate a retest towards $267.50-$268.
Current support is at $264.50-$264. A close below the latter would signal a further backtest towards $263-$262.50.
RSI is trying to curl higher with lower resistance at 55-60 getting cleared and holding. A close above the latter and the monthly peak would signal additional strength towards 65-70. Support is at 50-45 with the latter representing the late June low.
The Consumer Discretionary Select Spiders (XLY) was up for the 2nd-straight session and for the 5th time in 6 with the morning high hitting $136.69. Current and lower resistance at $136.50-$137 was breached but held. A move above the latter would indicate additional strength towards $137.50-$138 with last week’s all-time peak at $137.51.
Support is at $135.50-$135 followed by $133.50-$133.
RSI is in an uptrend with lower resistance at 60-65 getting cleared and holding. A close above the latter would suggest additional strength towards 70-75 and the June highs. Support is at 55-50 with the latter holding since early April.
We are still waiting for the confirmation of a blowoff the top rally, or a nasty pullback. I’m still hopeful the market can take another leg higher, this week, but please remember we are in 9-session trading range. I don’t like taking positions just to be trading as flat action can crush option premiums. Trust me, I’m so ready to put fresh money to work but we need to be a tad patient.
I could have a New Trade today so stay locked-and-loaded throughout the session in case I take action. We sent a Text Alert last night at 8:05pm (EST). If you did not get the message, please email this morning.
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, $47.19, up $0.79)
CSCO August 50 calls (CSCO200821C00050000, $0.50, up $0.10)
Entry Price: $0.65 (7/21/2020)
Exit Target: $1.30
Stop Target: None
Action: Monday’s peak reached $47.26 with lower resistance at $47-$47.50 getting cleared and holding. Support is at $46.50-$46. Earning are due out on August 12th.
Viavi Solutions (VIAV, $13.63, up $0.29)
VIAV August 14 calls (VIAV200821C00014000, $0.55, up $0.05)
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 and held with yesterday’s peak reaching $13.63. Support remains at $13.25-$13. Earnings are due out August 11th.