Pre-Market Update for 10/28/2020

Tech Rebounds but Bears Stay Aggressive

8:00am (EST)

Wall Street closed mostly in the red on Tuesday with Tech outperforming after holding positive territory throughout the session. The tighter trading ranges were a relief from Monday’s punishment although volatility remained elevated.

Microsoft (MSFT) could provide some momentum for Wednesday’s open after topping earnings estimates and revenues. The news comes ahead of Thursday’s parade of earnings and the busiest week of the 3rd-quarter season.

The Nasdaq tested a late day peak of 11,465 before settling at 11,431 (+0.6%). Current and lower resistance at 11,400-11,500 was recovered. A close above the latter would indicate a retest towards 11,600-11,700.

The S&P 500 closed at 3,390 (-0.3%) after tapping a late day low of 3,388. Near-term and upper support at 3,375-3,350 was breached but held for the 2nd-straight session. A drop below the latter would suggest additional weakness towards 3,325-3,300.

The Dow tagged a low of 27,457 while ending at 27,463 (-0.8%). Upper support at 27,500-27,250 was tripped but held. A close below the latter would signal further downside risk towards 27,000-26,750.

The Russell 2000 finished on the session low of 1,590 (-0.9%). Current and upper support at 1,600-1,585 failed to hold. A move below the latter would indicate a further retreat towards 1,580-1,565.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the second-straight session after tagging a monthly high of 33.77. Current and lower resistance at 33.50-34 was cleared but held. A move above the latter would signal a retest towards 36-38 and levels from early September.

Support remains at 32-31.50 followed by 31-30.50 and the 200-day moving average.

The Invesco QQQ Trust (Nasdaq: QQQ) rebounded after trading to a morning peak of $283.51. Near-term and lower resistance at $283.50-$284 was cleared but held. A close above the latter would indicate additional strength towards $285-$285.50.

Support is at $281-$280.50 and the 50-day moving average followed by $279.50-$279.

RSI (relative strength indicator) has leveled out with key resistance at 50 getting reclaimed. Continued closes above this level would signal additional strength towards 55-60. Support is at 45-40.

The Consumer Staples Select SPDR Fund (NYSE: XLP) was down for the second-straight session following the pullback to $64.35. Near-term and upper support at $64.50-$64 and the 50-day moving average failed to hold. A close below the latter would indicate additional weakness towards $63-$62.50.

Lowered resistance is at $65-$65.50.

RSI remains in a downtrend with upper support at 45-40 failing to hold. There is weakness towards 35-30 on a close below the latter and levels from March. Resistance is at 50.

It appears the VIX could test 36-38 and levels I would like to see hold this week before possibly adding call options. If the VIX clears 40, I have a few quick bearish trades ready to deploy. In the meantime, let’s see how the action shakes out.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 38-10 (79%). 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 and Text Alerts.

Rambus (RMBS, $14.08, down $0.06)

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: Upper support at $14-$13.75 and the 200-day moving average held on the fade to $14.04 yesterday. Resistance remains at $14.25-$14.50.