MomentumOptions.com Pre-Market Update for 8/18/2020

Nasdaq Tags 33rd Record High for 2020

8:00am (EST)  

The market traded mostly higher on Monday after Speaker Pelosi recalled the House from its recess to deal with funding the post office and continued work on a coronavirus stimulus package. The blue-chips lagged while the broader market and Tech continued their assault on all-time highs.

The Nasdaq was up for the 3rd time in 4 sessions after jumping 1% with the late day and all-time high reaching 11,144. Near-term and lower resistance at 11,050-11,150 was cleared and held. A close above the latter would indicate additional strength towards 11,250-11,350.

The Russell 2000 was higher by 0.5% following the midday push to 1,586. Near-term and lower resistance at 1,585-1,600 was reclaimed by a half-point. A close above the latter would suggest further upside towards 1,610-1,625.

The S&P 500 rose 0.3% with the afternoon peak hitting 3,387. Lower resistance at 3,375-3,400 was recovered. A move above the latter and the all-time high at 3,393 would signal additional momentum towards the 3,425-3,450 area.

The Dow dipped 0.3% after testing a morning low of 27,816. Near-term and upper support at 27,850-27,750 was breached for the 4th-straight session and failed to hold. A close below the latter would indicate a further pullback towards 27,600-27,500.

Communication Services showed the most sector strength after soaring 1.3% while Real Estate and Technology were up 0.8% and 0.6%, respectively. Financials were the weakest sectors after falling 1.6% while Energy and Industrials gave back 0.5%.

In economic news, Empire State Manufacturing Index dropped 13.5 points to 3.7 in August, well below expectations for a reading of 17, and follows the 17.4 increase in July to 17.2. Weakness was in new orders which dropped to -1.7 after rallying to 13.9 in July. The employment component edged up to 2.4 from 0.4 while inventories fell to -10.7 from -9.7. Prices paid rose to 16 from 14.9, with prices received rebounding to 4.7 from -4.5. The 6-month general activity index slide to 34.3 from 38.4. The future employment component fell to 15.5 from 21.1, with new orders declining to 37.2 from 41.9. The future prices paid gauge dropped to 22.7 from 28.6, with prices received at 9.3 from 10.4. Capex dipped to 8 from 8.4.

NAHB Housing Market Index reported its housing index jumped 6 points to 78 in August, topping forecasts for a print of 72, after surging 14 points to 72 in July. The single family index rose 6 points to 84. The future sale index edged up 3 points to 78 while the index of investor traffic jumped 8 points to 65 from 57. The report noted that housing has clearly been a bright spot during the pandemic.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 6-session slide after trading to an intraday high of $164.46. Fresh and lower resistance at $164.50-$165 was challenged but held. A close above the latter and the 50-day moving average would be a more bullish signal of a near-term bottom with additional hurdles at $165.50-$166.

Support remains at $163.50-$163. A close below the $162.50 level would be a renewed bearish signal with further weakness towards $162-$161.50 and levels from early July.

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The S&P 500 Volatility Index ($VIX) extended its losing streak to 4-straight sessions with the low tapping 21.34 ahead of the closing bell. Current and upper support at 21.50-21 was cleared and held. A close below the 20 level and the monthly low at 20.28 would signal continued weakness with additional backtest potential towards 17.50-17 and levels from late February.

Resistance remains at 23.50-24. A close above the 25 level would be a slightly bearish development with upside potential towards 27.50-28 and the 200-day and 50-day moving averages.

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The Spider Small-Cap 600 ETF (SLY) was up for the 2nd-straight session and for the 3rd time in 4 following the midday push to $65.47. Current and lower resistance at $65.50-$66 was challenged but held. A close above the latter and last week’s peak at $66.59 would indicate a retest towards $67-$67.50 and levels from late February.

Support is at $65-$64.50. A close below the latter would be a slightly bearish development with additional pullback potential towards $63-$62.50. 

RSI is in an uptrend with key resistance and the monthly high at 70 holding. Continued closes above this level would signal strength towards 75 and the early June top. Support is at 65-60.

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I have updated our current trades so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 28-9 (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.

Consumer Staples Select Spiders (XLP, $64.52, up $0.36)

XLP September 65 calls (T200918C00065000, $0.85, up $0.10)

Entry Price: $0.85 (8/17/2020)

Exit Target: $1.70

Return: 0%

Stop Target: None

Action: The Consumer Staples Select Spiders (XLP) snapped a 2-session slide after tagging a morning high $64.73. Lower resistance from late February at $64.50-$65 was recovered. A close above the latter and February’s all-time high at $64.84 would be an ongoing bullish signal for a breakout towards $66.50-$67.

Current and rising support is at $64-$63.50. A close below the latter would be a slightly bearish development and signal a possible near-term top with additional pullback potential towards $62.50-$62.

RSI is in an uptrend with key resistance from January at 75 holding. A move above this level and would suggest additional strength towards 80 and overbought levels from June 2017. Support is at 70-65.

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AT&T (T, $29.85, down $0.16)

T September 31 calls (T200918C00031000, $0.30, down $0.05)

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

Exit Target: $1.00

Return: -30%

Stop Target: None

Action: Monday’s low tapped $29.80 with current and upper support at $29.75-$29.50 getting challenged but holding. Resistance is at $30-$30.25 at the 50-day moving average.

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