MomentumOptions.com Pre-Market Update for 8/21/2020

Nasdaq Books 35th Record Close

8:00am (EST)  

The market shook off a disappointing jobless claims number and larger-than-anticipated drop in the Philly Fed to settle mostly higher on Thursday. Slightly good news on the U.S./ China trade front helped sentiment after China’s commerce ministry said the two sides will hold the delayed talks in the coming days.

The Nasdaq rebounded 1.1% to close higher for the 3rd time in 4 sessions with the intraday all-time high reaching 11,283. Uncharted territory and lower resistance at 11,250-11,350 was cleared and held. A close above the latter would indicate additional upside towards 11,400-11,500.

The S&P 500 added 0.3% after testing an intraday high of 3,390. Near-term and lower resistance at 3,375-3,400 was recovered. A move above the latter and this week’s all-time peak at 3,399 would be a bullish signal for a run towards 3,425-3,450.

The Dow nudged up 0.2% after trading to an intraday high of 27,781. Current and lower resistance at 27,750-28,000 was cleared but held. A close above the latter would be a bullish signal for additional strength towards 28,250-28,500.

The Russell 2000 was lower by 0.5% following the opening backtest to 1,554. Fresh and upper support at 1,565-1,550 was breached and failed to hold. A drop below the latter would signal a further pullback towards 1,540-1,525.

Technology led sector strength after rising 1.3% while Communication Services and Real Estate were up 1.2% and 1.1%, respectively, to round out the winners. Energy was the weakest sector after sinking 2.2% while Financials and Utilities slumped 0.9%. 

In economic news, Initial Jobless Claims climbed 135,000 to 1,106,000, following the prior week’s -220,000 decline to 971,000. Expectations were for a print of 963,000. The 4-week moving average slid to 1,175,750 from 1,254,750. On a not seasonally adjusted basis, initial claims rose 52,800 to 891,500 after declining -149,600 previously. Continuing claims retreated -636,000 to 14,844,000 after dropping -610,000 to 15,480,000 in the prior week.

Philadelphia Fed Business Outlook Survey dropped -6.9 points to 17.2 in August, weaker than forecasts for a reading of 21.5. The employment component dropped to 9 from 20.1 while the workweek slipped to 11.3 from 17.2. New orders fell to 19 from 23 while shipments declined to 9.4 from 15.3. Prices paid were little changed at 15.3 from 15.7 with prices received inching up to 12.4 from 11.5. The 6-month general business activity index edged up to 38.8 after diving 30.3 points to 36 in July. The future employment index slid to 29.5 from 32.4, with new orders at 55.1 from 55.6. The 6-month prices paid index declined to 37.7 from 43, with prices received at 30.2 from 24.7. Capex fell to 23 from 26.6.

Leading Indicators rose 1.4% to 104.4 in July, matching expectations, after climbing 3% to 103 in June. Six of the 10 components posted positive contributions, led by the workweek (0.56%) and building permits (0.50%), while consumer expectations (-0.11%) led the four sub-indexes that made negative contributions.

The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 3rd time in 4 sessions after testing an midday high of $165.65. Current and lower resistance at $165.50-$166 was cleared but held for the 2nd-straight session. A close above the latter and the 50-day moving average would be a more bullish signal for continued strength towards $167-$167.50.

Support is at $164.50-$164 followed by $163.50-$163.

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The S&P 500 Volatility Index ($VIX) extended its winning streak to 3-straight sessions following the opening spike to 24.60. Prior and lower resistance at 24.50-25 was cleared but held. A close above the latter would suggest further upside towards 27.50-28 and the 200-day/50-day moving averages.

Rising support is at 22.50-22 followed by 21.50-21.

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The iShares Russell 1000 (IWF) was up for the 3rd time in 4 sessions with the afternoon and fresh all-time high tapping $217.74. New and lower resistance is at $217.50-$218 was cleared but held. A move above the latter would suggest additional momentum towards the $219.50-$220 area.

Current support is at $216.50-$216 followed by $214-$213.50.

RSI is in a slight uptrend with key resistance at 70 holding. A close above this level would signal additional strength towards 75 and the early June peak. Support is at 65-60.

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Sector

The Health Care Select Sector Spider (XLV) extended its losing streak to 3-straight sessions to remain in a longer-term trading range from mid-July following the pullback to $106.43. Upper support at $106.50-$106 was tripped but held. A close below the latter would signaling additional weakness towards $105-$104.50 with the late July low at $104.43.

Current resistance is at $107-$107.50. A close above the latter and Monday’s all-time high at $107.84 would signal a possible breakout towards the $109.50-$110 area.

RSI is in a downtrend with upper support at 55-50 holding. A close below the latter would signal additional weakness towards 45-40 and levels from June. Resistance is at 60.

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I did an in-depth writeup on the $VIX yesterday and the main reason we didn’t open a new trade. However, a death cross has formed and something I will talk about on Monday.

I’ve been watching the action in Twitter (TWTR) as shares could be on the verge of a breakout, or topping out, depending on how the $40 level reacts over the next session or 2. 

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If I take action today, I will send out a Trade Alert. In the meantime, 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, $64.14, down $0.13)

XLP September 65 calls (T200918C00065000, $0.65, down $0.05)

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

Exit Target: $1.70

Return: -21%

Stop Target: None

Action: Yesterday’s low kissed $63.79 with current and upper support at $64-$63.50 getting breached but holding. Resistance is at $64.50-$65.

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AT&T (T, $29.67, down $0.06)

T September 31 calls (T200918C00031000, $0.25, flat)

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

Exit Target: $1.00

Return: -50%

Stop Target: None

Action: Shares tapped a low of $29.50 with prior and upper support at $29.50-$29.25 holding. Resistance is at $29.75-$30 and the 50-day moving average.

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