MomentumOptions.com Pre-Market Update for 9/18/2020
Bears Return to Push Prior Trading Ranges
The market settled in a sea of red on Thursday following disappointing economic news and the continued fallout over negotiations on another coronavirus stimulus package. The losses held near-term and key support levels with the bulls needing a bounce back on Friday to avoid their 3rd-straight weekly loss.
The Dow had its 4-session winning streak snapped after testing a morning low of 27,647 while closing at 27,901 (-0.5%). Near-term and upper support at 27,750-27,500 was tripped but held. A close below the latter would suggest additional weakness towards 27,250-27,000.
The Russell 2000 tested an opening low of 1,526 before going out at 1,542 (-0.6%). Prior and upper support at 1,540-1,525 was breached but held. A move below the latter would indicate further weakness towards 1,515-1,500.
The S&P 500 settled at 3,357 (-0.8%) following the intraday backtest to 3,328. Prior and upper support at 3,350-3,325 was breached but held. A close below the latter and the 50-day moving average would signal further downside risk towards the 3,300-3,275 area.
The Nasdaq ended at 10,910 (-1.3%) after plunging to a midday low of 10,793 and closing back below the 50-day moving average. Prior and upper support at 10,800-10,700 was breached but held. A move below the latter would suggest further downside risk towards 10,600-10,500 and levels from late July.
In economic news, Initial Jobless Claims fell -33,000 to 860,000, versus forecasts for 850,000, after a revised 893,000 print in the prior week. The 4-week moving average declined -61,000 to 912,000 from 973,000. Continuing claims dropped -916,000 to 12,628,000.
Housing Starts dipped -5.1% to a 1,416,000 pace in August, versus expectations of 1,486,000, and follows the 17.9% surge to 1,492,000 in July. All of the headline weakness was in multifamily starts which were down to 395,000 after climbing to 511,000 in July. Single family sales increased to 1,021,000 after the rise to 981,000 previously.
Building Permits fell to 1,470,000 in August following the prior jump to 1,483,000 in July.
Philadelphia Fed Business Outlook Survey was down 2.2 points to 15 in September, weaker than expectations of 15.5, after declining 6.9 points to 17.2 in August. The employment index rose to 15.7 from 9 previously while new orders improved to 25.5 from 19. Shipments surged to 36.6 from 9.4. Prices paid soared to 25.1 versus 15.3, while prices received jumped to 18.4 from 12.4. Inventories sank to -10.8 from -1.9. The 6-month outlook index climbed to 56.6 versus 38.8, with employment jumping to 42.7 from 29.5, and new orders edging up to 56.9 versus 55.1. Prices paid increased to 57.7 versus 37.7, with prices received rising to 42.4 from 30.2. Capital expenditures rose to 31 from 23.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) snapped a three session slide after trading to a high of $164.96. Near-term and lower resistance at $165-$165.50 was challenged but held for the 2nd-straight session. A close above $166 and the 50-day moving average would be a more bullish signal for a retest towards $167-$167.50.
Current and rising support at $164-$163.50.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for second-straight session following the first half surge to 28.92. Prior and lower resistance at 28.50-29 was breached but held. A close above the latter and the 200-day moving average would indicate additional strength towards 30-30.50.
Support remains at 25.50-25 and the 50-day moving average.
The Invesco QQQ Trust (Nasdaq: QQQ) fell for the 2nd-straight session with the intraday low tapping $266.68. Prior and upper support from last Friday at $267-$266.50 was breached but held. A close below the latter would suggest a further slide towards the $262.50-$260 area.
Lowered resistance is at $272.50-$273 and the 50-day moving average.
RSI (relative strength) is in a downtrend with key support at 40 and the monthly low holding. A close below this level would get weakness towards 35 and the late March low in play. Resistance is at 45-50.
The Spider S&P Retail ETF (NYSE: XRT) zigzagged for the fourth straight-session following the intraday pullback to $50.01. Prior and upper support at $50.50-$50 was tripped but held. A move below the latter would signal further weakness towards $49.50-$49 and the 50-day moving average.
Resistance is at $51-$51.50. A close above the $52 level would be a bullish signal for a retest towards $54-$53.50 with the all-time high from earlier this month at $53.66.
The recent Friday’s closing have been bearish over the past few weeks and the back half of September is typically a weak month for the stock market. It will be import for the bulls to reverse this trend tomorrow and to possibly avoid a third-straight weekly loss.
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.
Freeport McMoRan (FCX, $17.03, up $0.25)
FCX November 18 calls (FCX201120C00018000, $1.25, up $0.15)
Entry Price: $1.05 (9/16/2020)
Exit Target: $2.10
Stop Target: $1.05 (Stop Limit)
Action: Set an initial Stop Limit at $1.05 to start protecting profits and to avoid a loss.
Shares tested another fresh 52-week high of $17.20 with lower resistance at $17-$17.25 getting cleared and holding. Support is at $16.75-$16.50.
AT&T (T, $29.07, down $0.17)
T October 28 puts (T201016P00028000, $0.40, up $0.05)
Entry Price: $0.55 (9/10/2020)
Exit Target: $1.10
Stop Target: None
Action: Thursday’s low kissed $28.95 with upper support at $29-$28.75 getting breached but holding. Lowered resistance at $29.25-$29.50.
Rambus (RMBS, $13.91, down $0.18)
RMBS November 13 puts (RMBS201120P00013000, $0.70, up $0.10)
Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Stop Target: None
Action: Prior and upper support at $13.75-$13.50 was breached but held on the pullback to $13.69. Resistance is at $14-$14.25 and the 200-day moving average.