MomentumOptions.com Pre-Market Update for 8/7/2020
Nasdaq Records 4th-Straight Record Close
The market traded in a tight range throughout the first half of Thursday’s action despite a better-than-expected jobs report. Momentum came back into play after President Trump indicated his administration is still working on a stimulus package in case Congress can’t deliver a fresh aid bill by Friday.
President Trump indicated he is ready to sign an Executive Order with respect to Payroll Tax Cut, Eviction Protections, Unemployment Extensions, and Student Loan Repayment Options if a delay persists. The news propelled a 2nd half rally to higher highs with the Nasdaq recording its 4th-straight record close.
The Nasdaq rallied 1% after tapping a late day and lifetime peak of 11,121. Uncharted territory and lower resistance at 11,050-11,150 was cleared and held. A close above the latter would indicate additional upside towards 11,200-11,300.
The Dow gained 0.7% following the afternoon high push to 27,394. Prior and lower resistance from early June at 27,250-27,500 was reclaimed. A close above the latter and the June peak at 27,580 would be an ongoing bullish development for additional strength towards 27,750-28,000.
The S&P 500 rose 0.6% with the high reaching 3,351 just ahead of the closing bell. Early February and lower resistance at 3,350-3,375 was breached but held. A pop above the latter would suggest continued strength towards the 3,400-3,425 area with the current all-time high at 3,393.
The Russell 2000 slipped 0.1% despite testing a morning high of 1,550. Prior and lower resistance from early June at 1,550-1,565 was cleared by a half-point but held. A close above the latter would indicate additional momentum towards 1,570-1,585.
Communication Services led sector strength after zooming 2.6% while Technology jumped 1.4%. Energy and Healthcare were the leading laggards after giving back 0.8% and 0.5%, respectively.
In economic news, Challenger Job-Cut Report announced layoffs surged 92,400 to 262,600 in July. That’s the third highest monthly total on record, and compares to April’s 671,100 cut and 397,000 in May. Also, cuts are up 576.1% year-over-year and are at 1,847,700 year-to-date. Most of the job losses continue to come from the leisure and entertainment companies which includes restaurants, bars, hotels, and amusement parks and were at 109,900 layoffs announced for July. Transportation announced 65,100 in cuts. Hiring announcements increased 171,100 to 246,500, led by warehousing (100,300) and services (33,500).
Initial Jobless Claims dropped -249,00 to 1,186,000 versus forecasts for a print of 1,442,000. The 4-week moving average slid to 1,337,800 from 1,368,750. Continuing claims declined -844,000 to 16,107,000 versus the revised 800,000 bounce to 16,951,000 preciously.
The iShares 20+ Year Treasury Bond ETF (TLT) rebounded after trading to a fresh multi-month high of $172.25. Lower resistance from late April at $172-$172.50 was breached but held. A close above the latter would be an ongoing bullish development with upside potential towards $173.50-$174 and early March levels.
Current support is at $170.50-$170 followed by $169-$168.50.
The S&P 500 Volatility Index ($VIX) extended its losing streak to 5-straight sessions after tagging a low of 20.97 shortly after the opening bell. Longer-term and upper support from late February at 21-20.50 was breached but held.
The bounce to 24.11 afterwards cleared but held near-term and lower resistance at 24-24.50. A close above the 25 level would suggest additional upside risk towards 27-27.50 and the 200-day moving average.
The Spiders Dow Jones Industrial Average ETF (DIA) extended its winning streak to 5-straight sessions after reaching an intraday peak of $274.03. Early June and lower resistance at $274-$274.50 was cleared but held. A close above the latter would indicate a retest towards $276-$276.50 with the June peak at $276.38.
Rising support is at $272.50-$272 followed by $270.50-$270.
RSI remains in an uptrend with key resistance at 65 holding. A close above this level would indicate additional strength towards 70-75 and early June levels. Support is at 60 with a move below this level suggesting additional weakness towards 55-50.
The Materials Select Sector (XLB) had its 2-session winning streak snapped following the first half pullback to $61.26. Current and upper support at $61.50-$61 was tripped and failed to hold. A close below the latter would signal a further backtest towards $60-$59.50 with the late July low at $59.60.
Resistance is at $62-$62.50. A close above the latter and the late July 52-week peak at $62.59 would be a renewed bullish signal for a run towards $63-$63.50 and record levels from January 2018.
RSI is back in a downtrend after failing to hold key support at 60. Continued closes below this level keeps downside weakness towards 55-50 in play. Resistance is at 65-70 with the latter representing the July high.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 25-8 (76%). 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.
Western Union (WU, $22.76, down $0.12)
WU September 26 calls (WU200918C00026000, $0.20, down $0.05)
Entry Price: $0.50 (8/3/2020)
Exit Target: $1.00
Stop Target: None
Action: Shares tested a low of $22.69 upper support at $22.50-$22.25 getting challenged but holding. Lowered resistance is at $23-$23.25 and the 200-day moving average.
iShares Emerging Markets (EEM, $44.79, up $0.14)
EEM September 45 calls (EEM200918C00045000, $1.15, up $0.05)
Entry Price: $0.82 (7/28/2020)
Exit Target: $1.65
Stop Target: 90 cents (Stop Limit)
Action: Thursday’s high reached $44.81 with early January and lower resistance at $44.75-$45.25 getting cleared but holding. A close above the latter would be a very bullish signal for a breakout towards $46-$46.50 Support is at $44.25-$43.75.
Cisco Systems (CSCO, $47.77, up $0.44)
CSCO August 50 calls (CSCO200821C00050000, $0.60, up $0.15)
Entry Price: $0.65 (7/21/2020)
Exit Target: $1.30
Stop Target: None
Action: Yesterday’s peak reached $47.83 with lower resistance at $48-$48.50 getting challenged but holding. Support is at $47.50-$47.
Viavi Solutions (VIAV, $14.30, up $0.04)
VIAV August 14 calls (VIAV200821C00014000, $0.75, flat)
Entry Price: $0.60 (7/13/2020)
Exit Target: $1.20
Stop Target: 60 cents (Stop Limit)
Action: Shares were up for the 6th time in 7 sessions following Wednesday’s trip to $14.30. Lower resistance at $14.25-$14.50 getting recovered. Support is at $14-$13.75.