MomentumOptions.com Pre-Market Update for 8/19/2020
S&P 500 Finally Tags Fresh All-Time High
The market traded on both side of the ledger on Tuesday before settling mixed with the S&P 500 and Nasdaq setting fresh intraday and all-time closing highs. Another solid report from the housing market mostly outweighed the relentless uncertainties over the coronavirus, re-openings and the overall economic recovery.
The Nasdaq was up for the 2nd-straight session and for the 4th time in 5 after adding 0.7% while tapping a late day and all-time high of 11,230. Uncharted territory and lower resistance at 11,150-11,250 was cleared and held. A close above the latter would suggest additional momentum towards the 11,350-11,450 area.
The S&P 500 climbed 0.2% after trading to a record high of 3,395 shortly after the opening bell. Fresh and lower resistance at 3,400-3,425 was challenged but held. A move above the latter would signal additional upside towards 3,450-3,475.
The Russell 2000 sank 1% following the intraday tumble to 1,566. Current and upper support at 1,575-1,560 was breached and failed to hold. A close below the latter would signal a further pullback towards 1,550-1,535.
The Dow was down 0.2% with the first half low kissing 27,668. Near-term and upper support at 27,750-27,650 was breached but held. A drop below the latter would indicate additional weakness towards 27,600-27,500.
Communication Services showed the most sector strength for the 2nd-straight session after rising 0.9% while Consumer Discretionary was up 0.6%. Energy was the weakest sector after sinking 1.3% while Financials and Industrials were down 0.7% and 0.6%, respectively.
In economic news, Housing Starts climbed 22.6% in July to a hefty 1,496,000, topping forecasts for a print of 1,240,000, and follows the 17.5% June surge to 1,220,000. Most of the strength was in the multifamily sector where starts popped 58.4% to 556,000 after the 13.2% jump to 351,000. Single family starts were up 8.2% to 940,000 following June’s 19.4% surge to 869,000.
Building Permits jumped 18.8% to 1,495,000 after June’s 3.5% increase to 1,258,000. Forecasts were at 1,300,000.
Chain store sales bounced 1.4% last week, following a -1.5% drop previously. The pace of contraction continues to erode and improved to -5.3% year-over-year from -6.8% in the prior week, and -7.9% in the week before that. The back-to-school shopping season has been impacted by the pandemic, with technology replacing traditional school supplies and clothing.
Redbook Store Sales down -2.8% for the year in the week ending August 15th.
The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session with the afternoon high hitting $164.87. Prior and lower resistance at $164.50-$165 was cleared and held. A close above $165.50 and the 50-day moving average would be an ongoing bullish signal of a near-term bottom with additional hurdles at $166-$166.50.
Rising support is at $164-$163.50 followed by $163-$162.50.
The S&P 500 Volatility Index ($VIX) was up for the just the 2nd time in 13 sessions after testing an intraday high of 22.55. Current and lower resistance 22.50-23 was breached but held with backup help at 24.50-25.
Support remains at 21.50-21 with a close below the 20 level and the monthly low at 20.28 being an ongoing bullish signal for the market.
The Spiders Dow Jones Industrial Average ETF (DIA) remains in a mini 6-session trading range following the pullback to $277.11. Current support at $277.50-$277 was breached but held. A drop below the latter would indicate a further backtest towards $276.50-$276.
Resistance is at $279.50-$280 followed by $281.50-$282 with last week’s peak at $281.78.
RSI is in a slight downtrend with upper support at 65-60 holding. A move below the 60 level would suggest additional weakness towards 55-50 with the latter holding since late June. Resistance at 70. A close above this level would indicate additional strength towards 75 and early June high.
The Dow Jones Transportation Average ($TRAN) is also in a 6-session trading range following the late day pullback to 10,853 and strong breakout from the start of the month off the 10,000 level. Current and upper support at 10,900-10,800 was breached and failed to hold. A close below the 10,750 level would suggest additional weakness towards the 10,600-10,500 area.
Near-term resistance is at 11,000-11,100. A close above the latter would indicate additional strength with upside potential towards 11,250-11,350 and levels from mid-January.
RSI is in a downtrend with upper support at 75-70 failing to hold. A close below the latter would signal additional weakness towards 65-60. Overbought resistance is at 80 and the monthly peak.
I have updated our current trades and I could a New Trade at some point today, depending on the action.
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, $64.78, up $0.26)
XLP September 65 calls (T200918C00065000, $0.95, up $0.10)
Entry Price: $0.85 (8/17/2020)
Exit Target: $1.70
Stop Target: None
Action: Shares were up for the 2nd-straight session with the intraday and all-time high reaching $64.96. Fresh and lower resistance at $65-$65.50 was challenged but held. A close above the latter indicate a possible breakout towards $66.50-$67.
Current and rising support is at $64.50-$64.
AT&T (T, $29.79, down $0.06)
T September 31 calls (T200918C00031000, $0.30, flat)
Entry Price: $0.50 (8/10/2020)
Exit Target: $1.00
Stop Target: None
Action: Shares tested a low of $29.77 with current and upper support at $29.75-$29.50 getting challenged but holding for the 4th-straight session. Resistance remains at $30-$30.25 at the 50-day moving average.