Pre-Market Update for 11/3/2020

Bulls Rebound to Start the Week

8:00am (EST)

Wall Street rebounded on Monday as positive economic news outweighed ongoing coronavirus concerns and the upcoming all-important Presidential election. The major indexes held their gains but closed off the highs as Tech tumbled into negative territory midday after President Trump talked about taking action against some of the Tech heavyweights.

The Russell 2000 finished on its session high of 1,568 (+2%). Fresh and lower resistance at 1,560-1,575 was reclaimed. A close above the latter would be an ongoing bullish signal for another run towards 1,585-1,600.

The Dow tested an morning peak of 27,043 while closing at 26,925 (+1.6%). New and lower resistance at 27,000-27,250 was breached but held. A pop above the latter would indicate additional strength towards 27,500-27,750.

The S&P 500 settled at 3,310 (1.2%) following the intraday push to 3,330. Prior and lower resistance at 3,325-3,350 was cleared but held. A move above the latter would suggest a retest towards 3,375-3,400.

The Nasdaq reached an opening peak of 11,071 before ending at 10,957 (+0.4%). Near-term and lower resistance at 11,000-11,100 was tripped but held. A close above the latter would indicate ongoing upside towards 11,200-11,300.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the second time in three sessions after tapping an intraday low of 36.13. Upper support at 36.50-36 was breached but held. A close below the 34 level would be a more bullish signal of a near-term top.

Resistance remains at 40.50-41 with last week’s peak at 41.16. A move above 41.50 would likely indicate upside towards 42-44 and levels from June.

The SPDR S&P 500 ETF (NYSEArca: SPY) rebounded after trading to a high of $332.36. Lower resistance at $332-$332.50 was cleared but held. A close above the latter would indicate additional strength towards $334.50-$335.

Current support is at $328.50-$328 followed by $325-$324.50.

RSI is in a slight uptrend with lower resistance at 40-45 getting cleared and holding. A move above the latter would signal additional momentum towards 50-55. Support is at 35 and a level that has been holding since late September.

The Consumer Discretionary Select Spiders (XLY) showed strength for just the second time in six sessions with the first half peak hitting $145.35. Lower resistance at $145-$145.50 was breached but held. A move above the $146.50 level would be a more bullish setup for a retest towards $148-$148.50 and the 50-day moving average.

Support is at $143-$142.50. A close below last Friday’s low at $141.74 would be a renewed bearish development with additional downside risk towards $140-$139.50 and levels from late September.

RSI is back in a slight uptrend with key resistance at 40 holding. A close above this level would suggest additional strength towards 45-50. Support is at 35 with a move below this level indicating weakness towards 30-25 and levels from early March.

Typically, the stock market reacts to the economy, good or bad, and both could weigh on the outcome of Tuesday’s Presidential election. History shows that if a President can avoid a recession in the two years leading up to an election, the chances of reelection are a lock.

In fact, over the last 100 years, every president who averted a recession during this period was reelected. When there was a recession heading into the two years before the Presidential election, only one, Calvin Coolidge, went on to win reelection.

Another key indicator Wall Street has watching is the stock market’s performance leading up to a Presidential election. The performance of the S&P 500 in the three months before votes are cast has predicted 87% of elections since 1928 and 100% since 1984.

When returns were positive in the S&P 500, the incumbent party wins. If the index suffered losses over this three-month time frame, the incumbent loses. The S&P 500 closed at 3,271 on the last trading day in July and was at 3,310 as of Monday’s close.

I could have New Trades today so stay locked-and-loaded. In the meantime, I have updated our current positions.

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.

AT&T (T, $27.34, up $0.32)

T December 28 calls (T201218C00028000, $0.65, up $0.10)

Entry Price: $0.55 (10/29/2020)
Exit Target: $1.10
Return: 19%
Stop Target: None

Action: New and lower resistance at $27.50-$27.75 was cleared but held on Monday’s trip to $27.60. Rising support is at $27-$26.75.

Rambus (RMBS, $13.62, down $0.17)

RMBS November 13 puts (RMBS201120P00013000, $0.35, unchanged)

Entry Price: $0.90 (8/21/2020)
Exit Target: $1.80
Return: -61%
Stop Target: None

Action: Lower resistance at $14-$14.25 was recovered on the bounce to $14.14. Upper support is at $13.75-$13.50 and the 50-day moving average.

The company missed earnings by a country mile after reporting a loss of 11 cents a share on revenue of $50 million. Forecasts were for a profit of x a share on revenue of $100 million. I predicted another lousy quarter for Rambus and I would like to see a gap lower towards the $12-$11.50 on the open with weakness throughout the session.