MomentumOptions.com Pre-Market Update for 9/28/2020
Bears Stay Hot but Tech Shines
The market showed strong momentum on Friday, a rare event for September, to give the bulls some hope heading in the final three trading days for the month. Disappointing news weighed on the open that was followed by choppy action until midday with the exception of Tech and the small-caps.
The strong closes weren’t enough to offset another down week for the major indexes, although the Nasdaq snapped a 3-week losing steak. The Dow and S&P 500 extended their losing streak to 4-straight weeks while the Russell 2000 led overall weakness after leading strength in the prior week.
The Nasdaq tested a late day high of 10,939 before closing at 10,913 (+2.3%). Current and lower resistance at 10,900-11,100 was breached and held. A move above the latter and the 50-day moving average would suggest further strength towards 11,150-11,250.
The S&P 500 settled at 3,298 (+1.6%) with the final hour peak reaching 3,306. Lower resistance at 3,300-3,325 was cleared but held. A close above the latter would indicate further upside towards 3,350-3,375 and the 50-day moving average.
The Russell 2000 made a run to 1,478 while settling at 1,474 (+1.6%). Near-term and lower resistance at 1,475-1,490 was breached but held. A pop above the latter would signal another retest towards 1,500-1,515 and the 50-day moving average.
The Dow touched a high of 27,239 and went out at (+1.3%). Prior and lower resistance at 27,250-27,500 was breached but held. A close above the latter and the 50-day moving average would be a bullish signal for another push towards 27,750-28,000.
In economic news, Durable Goods Orders rose 0.4% in August after climbing 11.7% in July. Forecasts were for a rise of 1.5%. Transportation orders were up 0.5% after the 35.2% prior pop. Excluding transportation, orders also rose 0.4%, but July’s gain was revised sharply higher to 3.2%. Defense orders dropped -3.3% from the prior 30.8% gain. Nondefense capital goods orders excluding aircraft climbed 1.8% from and upwardly revised 2.5%. Shipments slid -0.3% versus the 7.6% July gain. Nondefense capital goods shipments excluding aircraft rose 1.5% versus 2.8%. Inventories slid -0.1% after dropping -0.8% previously. The inventory-shipment ratio was stead at 1.72.
Baker-Hughes reported the U.S rig count was up 6 from last week to 261 with oil rigs higher 4 to 183, gas rigs up 2 to 75, and miscellaneous rigs unchanged at 3. The U.S. Rig Count is down 599 rigs from last year’s count of 860, with oil rigs down 530, gas rigs down 71, and miscellaneous rigs up 2. The U.S. Offshore Rig Count was unchanged at 14, down 10 year-over-year.
The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) was flat after testing an intraday high of $165.42. Near-term and lower resistance at $165.50-$166 was challenged but held. A close above the latter and the 50-day moving average would suggest additional strength towards $167-$167.50.
Current support remains at $164.50-$164 followed by $163-$162.50.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) settled lower for the second-straight session after trading to a late day low of 26.02. Near-term and upper support at 26.50-26 was recovered. A close below the latter would indicate another retest towards 25.50-25 and the 50-day moving average.
Resistance remains at 29-29.50 and the 200-day moving average followed by 31-31.50.
The Wilshire 5000 Composite Index (NYSE: WLSH) showed strength for the second-straight session after tagging an intraday high of 33,893. Current and lower resistance at 33,750-34,000 was cleared and held. A move above the latter would indicate further upside towards 34,250-34,500 and the 50-day moving average.
Rising support is at 33,500-33,250 followed by 33,000-32,750.
The Industrials Select Sector SPDR Fund (NYSE: XLI) was up for the second-straight session after testing an intraday high of $76.75. Current and lower resistance at $76.50-$77 was reclaimed. A close above the latter would be a ongoing bullish signal with retest potential towards $78-$78.50.
Fresh support is at $76-$75.50 and the 50-day moving average followed by $74.50-$74.
RSI is back in a slight uptrend after clearing and holding lower resistance at 45-50. A close above the latter would suggest ongoing strength towards 55-60 with the latter representing the monthly high. Support is at 40 and a level that has been holding since early April.
Volatility continues to signal a choppy trading range and will likely continue into the first week of October and when the start of the third-quarter earnings season begins. This might change the current nervousness concerning the upcoming Presidential election and the coronavirus woes. However, it could add even more volatility, bullish or bearish, with a major trend developing into yearend.
A closer look at the charts for the major indexes show a 7-session trading range that follows a previous 7-session trading range with lower lows. Given the cycle of events happening throughout October, it will be imperative the bulls avoid lower lows this week. A close above the 50-day moving averages to end the month, along with the VIX taking out the 25 level, would be major victories for the bulls.
Momentum Options Play List
Closed Momentum Options Trades for 2020: 33-10 (77%). 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, $28.04, unchanged)
T October 28 puts (T201016P00028000, $0.85, down $0.05)
Entry Price: $0.55 (9/10/2020)
Exit Target: $1.10
Stop Target: 80 cents (Stop Limit)
Action: The Stop Limit at 80 cents was triggered on Friday with the options testing a low of 75 cents.
Rambus (RMBS, $13.29, down $0.03)
RMBS November 13 puts (RMBS201120P00013000, $0.80, unchanged)
Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Stop Target: None
Action: Upper support at $13.25-$13 was tripped but held with Friday’s low tapping $13.13. Resistance remains at $13.50-$13.75.