Pre-Market Update for 10/26/2020

Small-Caps Outperform in Down Week

8:00am (EST)

Wall Street closed mostly higher Friday despite ongoing concern over another financial-aid package being passed and implemented before the Presidential election. The major indexes remained choppy and closed the week with losses, excluding the small-caps which settled higher for the week.

The Russell 2000 settled at 1,641 (+0.6%) with the late session high reaching 1,640. Current and lower resistance at 1,635-1,650 was cleared and held. A close above the latter and the monthly peak at 1,652 would indicate a push towards 1,660-1,675.

The Nasdaq went out on the session high of 11,548 (+0.4%). Near-term and lower resistance at 11,500-11,600 was recovered. A pop above the latter would suggest additional upside towards 11,700-11,800.

The S&P 500 finished at 3,465 (+0.3%) following the afternoon run to 3,466. Prior and lower resistance at 3,450-3,475 was breached and held. A move above the latter would signal a retest towards 3,500-3,525.

The Dow tested a midday low of 28,149 while closing at 28,335 (-0.1%). Near-term and upper support at 28,250-28,000 was tripped but held. A close above the latter would indicate additional weakness towards 27,750-27,500.

For the week, the Russell 2000 rose 0.4% while the S&P 500 lost 0.5%. The Nasdaq stumbled 1.1% and the Dow fell 1%.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) fell for the third-straight session with the intraday low tapping 27.28. Current and upper support at 27.50-27 was reclaimed. A close below the latter would signal another retest towards 26.50-26 and the 50-day moving average.

Lowered resistance is at 28.50-29 followed by 30.50-31 and the 200-day moving average.

The iShares Russell Growth 1000 ETF (NYSEArca: IWF) rebounded to snap a two-session slide with the late day high reaching $222.68. Near-term and lower resistance at $222.50-$223 was cleared and held. A move above the latter would indicate further strength towards $223.50-$224.

Support is at $221-$220.50. A close below the $220 level would be a renewed bearish signal for additional weakness towards $219-$218.50 and the 50-day moving average.

RSI has flatlined with lower resistance at 55-60 holding. A move above the latter would suggest additional strength towards 65-70. Key support is at 50 and a level that has been holding since late September.

The Technology Select Sector Spider Fund (NYSE: XLK) extended its losing streak to three-straight and was down for the eighth time in nine sessions following the pullback to $117.45. Current and support at $117.50-$117 was breached but held. A close below the latter and the 50-day moving average would signal additional weakness towards $116.50-$116.

Lowered resistance is at $118.50-$119 followed by $119.50-$120.

RSI is showing signs of rolling over with key support at 50 holding. A fall below this level reopens downside risk towards 45-40. Resistance is at 55-60.

I have made adjustments to lock-in further profits on MGM and FCX. I’m still hoping to squeeze a little more profit out of them but want to move on to other trades if they weaken. Once closed, it will be our 10th-straight winning trade. As for RMBS, I still like the trade as “insurance” heading into November with the company having a losing history of disappointing Wall Street earnings forecasts.

In any event, the portfolio will be super light heading into the Presidential election next Tuesday. The major indexes remains in a relatively tight trade 13-session trading ranges but near the bottom end following the breakout the first week of October.

Volatility has also confirmed the choppy action as the VIX has remained trapped between its 50-day and 200-day moving averages since mid-September, or the 31-straight sessions.

If the bears can clear and hold the 30 level and the 200-day moving average, the stock market likely heads lower with increased volatility. This level has been stretched several times with the high at 31.18 but hasn’t held into the closing bell.

On the flip side for the bulls, the VIX needs to clear and hold the 25-24 area and the 50-day moving average. This level came into play when the major indexes were making a run at fresh all-rime highs. Earlier this month, the VIX closed exactly on 25 with back-to-back intraday lows at 24.03 and 24.14.

Once the key areas of support (25) and resistance (30) are cleared or cracked, the major indexes will likely set a solid trend either way into yearend.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 36-10 (78%). 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.

MGM Resorts International (MGM, $23.36, up $0.74)

MGM November 23 calls (MGM201120C00023000, $1.70, up $0.40)

Entry Price: $0.95 (10/16/2020)
Exit Target: $1.90 (Limit Order on half)
Return: 79%
Stop Target: $1.25, raise to $1.50 (Stop Limit)

Action: Set a Limit Order to close half the trade at $1.90. Raise the Stop Limit at $1.25 to $1.50 to further protect profits.

Friday’s high reached $23.47 with prior and lower resistance from mid-September at $23.25-$23.50 getting cleared and holding. Fresh and rising support is at $$23-$22.75 followed by $22.25-$22 and the 50-day moving average.

Freeport McMoRan (FCX, $18.36, up $0.01)

FCX November 18 calls (FCX201120C00018000, $1.20, down $0.05)

Entry Price: $0.95 (10/9/2020)
Exit Target: $1.90
Return: 26%
Stop Target: $1.05, raise to $1.10 (Stop Limit)

Action: Raise the Stop Limit from $1.05 to $1.10.

Shares set another new 52-week high of $18.68 with fresh and lower resistance at $18.50-$18.75 getting cleared but holding. Support is at $18-$17.75.

RSI needs to clear 70 and the early September peak just north of this level to keep momentum going.

Rambus (RMBS, $14.26, up $0.01)

RMBS November 13 puts (RMBS201120P00013000, $0.30, flat)

Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Return: -67%
Stop Target: None

Action: Lower resistance at $14.50-$14.75 easily held with shares topping out at $14.30 for the 2nd-straight session. Support is at $14-$13.75.

Earnings are due out on November 2nd.