MomentumOptions.com Pre-Market Update for 8/14/2020

Tech Nudges Higher While Market Stalls 

8:00am (EST)  

The market settled mostly lower as ongoing stimulus talks continue to stall with House speaker Nancy Pelosi rejecting Secretary of the Treasury Steven Mnunchin’s call to resume negotiations. 

The stalemate overshadowed a better-than-expected jobless claims number and news of President Trump’s peace agreement with Israel and the United Arab Emirates.

The Nasdaq was up for the 2nd-straight session after adding 0.3% with the intraday peak reaching 11,124. Near-term and lower resistance at 11,050-11,150 was cleared but held. A close above the latter and last Friday’s all-time high at 11,126 would indicate additional upside towards 11,200-11,300.

The Dow gave back 0.3% after tagging a late day low of 27,789. Current and upper support at 27,850-27,750 was breached but held. A move below the latter would signal additional weakness towards 27,600-27,500.

The Russell 2000 was down 0.2% following the intraday pullback to 1,575. Key and upper support at 1,575-1,560 was kissed but held. A close below the latter would suggest a further backtest towards 1,550-1,535.

The S&P 500 slipped 0.2% after testing a low of 3,363 ahead of the closing bell. Near-term and upper support at 3,375-3,350 was breached and failed to hold with a drop below the latter signaling additional downside risk towards 3,325-3,300.

Communication Services and Technology was the only sector that closed higher after gaining 0.5% and 0.04%, respectively. Energy and Real Estate led sector weakness after falling 1.9% and 1.1%.

In economic news, Initial Jobless Claims dropped -228,000 to 963,000 following the -244,000 decline to 1,191,000 previously. The move to under 1 million was a relief from the huge gains that began in the second half of March as the coronavirus pandemic struck. Not seasonally adjusted initial claims eased -156,000 to 832,000 after contracting -219,000 to 988,000. The 4-week moving average was at 1,252,750 versus 1,339,000. Continuing claims declined -604,000 to 15,486,000 after falling -861,000 to 16,090,000 previously. 

July import prices rose 0.7% with export prices increasing 0.8%. This follows respective June gains of 1.4% and 1.2%. On a 12-month basis, import prices rose to a -3.3% year-over-year pace from -3.9% while export prices improved to -4.4% from -5.1%. For imports, petroleum prices remained firm and climbed another 7.8% from June’s 23.1% pop. Excluding petroleum, import prices edged up to 0.5% from 0.3% previously. Foods, beverage prices dropped -1.2% from -0.4% previously. As for exports, agricultural prices were up another 1.5%, the same as in July. Excluding ag, prices were up 0.7% from 1.2%.

The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 5th-straight session with the intraday low reaching $163.16. Prior and upper support from early July at $163.50-$163 was breached but held. A close below the latter would signal additional weakness towards $162.50-$162.

Lowered resistance is at $164.50-$165 and the 50-day moving average.

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The S&P 500 Volatility Index ($VIX) was down for the 2nd-straight session and for the 9th time in 10 after testing an afternoon low 21.45. Current and upper support at 21.50-21 was breached but held for the 2nd-straight session. A close below the 20 level would signal continued strength for the market with additional pullback potential towards 17.50-17 and levels from late February.

Resistance is at 23-23.50 followed by 24.50-25.

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The Russell 2000 ETF (IWM) is in a mini 4-session trading range after tapping an intraday high of $158.53 before the negative close. Lower resistance from late February at $158.50-$159 was cleared but held. A move above the $160 level would be a more bullish signal of a breakout with additional upside towards $161.50-$162 with the early June peak at $153.39. 

A golden cross has formed with the 50-day moving average crossing above the 200-day moving average. This is typically a bullish signal for higher highs.

The late day pullback to $156.65 held near-term and upper support at $157-$156.50. A close below the latter would suggest additional pullback potential towards $155.50-$155. 

RSI has flatlined with key resistance at 70 holding. A close above this level and the early June peak would suggest additional strength towards 75 and the high from January and last December. Support is at 65-60.

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The Technology Select Sector Spiders (XLK) extended its winning streak to 2-straight with the intraday high reaching $114.91. Current and lower resistance at $114.50-$115 was cleared but held. A close above the latter and last week’s all-time peak at $115.57 would signal additional momentum towards the $117-$117.50 area.

Near-term support is at $113.50-$113 followed by $111.50-$111.

RSI has leveled out with lower resistance at 65-70 holding. A close above the latter would indicate additional upside towards 75 and the early June peak. Support is at 60-55.

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The Nasdaq and S&P 500 nearly set fresh record highs with the latter fading after falling a six-pack shy of its 3,393 peak from February. Meanwhile, the newly formed golden cross in the Russell 2000 and continued lowered volatility were slightly bullish signals despite the mostly lower closes.

Today’s action should be a good indicator on how next week could unfold. With the portfolio light, I could add a new trade today so stay locked-and-loaded. If you don’t hear from me by 3:30pm (EST), have a great and safe weekend.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 27-8 (77%). 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.

AT&T (T, $29.91, down $0.27)

T September 31 calls (T200918C00031000, $0.35, down $0.10)

Entry Price: $0.50 (8/10/2020)

Exit Target: $1.00

Return: -30%

Stop Target: None

Action: Thursday’s low tapped $29.84 with upper support at $29.75-$29.50 holding. Lower resistance is at $30-$30.25 and the 50-day moving average.

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Western Union (WU, $23.44, up $0.07)

WU September 26 calls (WU200918C00026000, $0.35, flat)

Entry Price: $0.50 (8/3/2020)

Exit Target: $1.00

Return: -30%

Stop Target: None

Action: Shares tagged a high of $23.45 with lower resistance at $23.50-$23.75 getting challenged but holding. Support is at $23-$22.75 and the 200-day moving average.

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