MomentumOptions.com Pre-Market Update for 9/16/2020
Bulls Keep Grooving
The market finished higher on Tuesday with the blue-chip Dow giving up its early gains ahead of a policy update by the Federal Reserve. Tech led the upswing as the major indexes continued to rebound from last week’s selloff with 2 and 3-session winning streaks.
Volatility remains a wild card as the bulls were unable to hold lower lows and a key level pf support for the 2nd-straight session. Adobe Systems (ADBE) and FedEx (FDX) announced blowout earnings after the closing bell and will have some impact on Wednesday’s market open.
The Nasdaq tagged an intraday peak of 11,224 before finishing at 11,190 (+1.2%). Prior and lower resistance at 11,200-11,300 was cleared but held. A move above the latter would suggest a further retest towards 11,400-11,500.
The S&P 500 closed at 3,401 (+0.5%) with the midday high reaching 3,419. Lower resistance at 3,400-3,425 was recovered. A close above the latter would indicate further upside towards 3,450-3,475.
The Russell 2000 tested a high of 1,551 before going out at 1,538 (+0.1%). Current and lower resistance at 1,550-1,565 was cleared but held. Continued closes above the latter would be a bullish signal for a run towards 1,570-1,585.
The Dow traded to a morning high of 28,231 while ending at 27,995 (+0.01%). Prior and lower resistance at 28,000-28,250 was cleared but held for the 2nd-straight session. A move above the latter would be a bullish signal for additional strength 28,500-28,750.
In economic news, Import prices were up 0.9% and export prices rose 0.5% in August. This follows upwardly revised gains of 1.2% and 0.9%, respectively, in July. The gains in August brought 12-month rates up to -1.4% year-over-year for import prices from -2.8% and -2.8% year-over-year for export prices versus -3.8% previously.
New York Empire State Manufacturing Survey jumped 13.3 points to 17 in September after dropping -13.5 points to 3.7 in August. Forecasts were for a print of 6.5%.
Chain store sales declined -1.6% last week, versus the -1% pullback in the previous week. Sales were down -1.2% year-over-year for the week, versus -0.1% previously. According to the report, sales are a little weaker as back to school shopping has been extended given the uncertain effects of the coronavirus pandemic, with the trend expecting to continue into the fall.
Industrial Production rose 0.4% in August, weaker than expectations for a print of 1.2%, and follows an upwardly revised 3.5% gain in July. The August capacity utilization edged up to 71.4% from 71.1% previously.
The iShares 20+ Year Treasury Bond ETF (TLT) was down for the second-straight session after testing an intraday low of $163.79. Current and upper support at $164-$163.50 was breached but held. A move below the latter reopens risk towards $162.50-$162.
Resistance remains at $165-$165.50 followed by $166 and the 50-day moving average.
The iPath S&P Vix Short-Term Futures (VIX) extended its losing streak to three-straight sessions with the morning low tapping 24.92. Prior support from the start of the month at 25.50-25 and the 50-day moving average were breached but levels that held.
Resistance remains at 26.50-27 followed by 28.50-29 and the 200-day moving average.
The iShares Russell Growth 1000 ETF (IWF) was up for the second-straight session with the opening high reaching $218.68. Near-term and lower resistance at $218.50-$219 was cleared but held. A move above the $220 level would be a more bullish signal for additional strength towards the $221.50-$222 area.
Support is at $217-$216.50. A close below the latter would signal additional weakness towards $215.50-$215.
The SPDR S&P Homebuilders ETF (XHB) had its two-session winning streak snapped despite tagging an intraday peak of $54.18. Near-term and lower resistance at $54-$54.50 was cleared but held. A close above the latter and the late August all-time high at $54.71 would be a bullish signal for blue-sky upside towards $55.50-$56.
Support is at $53-$52.50. A drop below the latter would signal a possible near-term top with additional pullback potential towards $51.50-$51.
I would still like to open a few more trades but we are still waiting to see how the VIX reacts this week and if it can clear and hold the 25 level. The aforementioned chart for XHB looks promising. FCX is breaking out to fresh 52-week peaks.
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: 31-10 (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.
AT&T (T, $29.12, down $0.02)
T October 28 puts (T201016P00028000, $0.45, unchanged)
Entry Price: $0.55 (9/10/2020)
Exit Target: $1.10
Stop Target: None
Action: Upper support at $29-$28.75 was challenged but held on the pullback to $29.06. Resistance remains at $29.25-$29.50.
Rambus (RMBS, $13.73, up $0.12)
RMBS November 13 puts (RMBS201120P00013000, $0.75, down $0.05)
Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Stop Target: None
Action: Shares tagged a high of $13.84 with prior and lower resistance at $13.75-$14 getting cleared but holding. Support is at $13.50-$13.25.
A death cross remains in play with the 50-day moving average on track to fall below the 200-day moving average. This is typically a bearish development for lower lows.