Pre-Market Update for 11/9/2020

Market Posts Best Week Since April

8:00am (EST)

Wall Street settled slightly lower on Friday to close out a strong week as former Vice President Joe Biden edged closer to victory in the presidential election. The monthly jobs report outperformed expectations and provided some upside as Tech showed strength while volatility continued to fade.

The S&P 500 tested an opening low of 3,484 before settling at 3,509 (-0.03%). Current and upper support at 3,500-3,475 was breached but held. A move below the latter would signal further downside risk towards 3,450-3,425.

The Dow finished at 28,323 (-0.2%) after trading down to 28,189 shortly after the opening bell. New and upper support at 28,250-28,000 was breached but a level that held. A drop below the latter would suggest a retest towards 27,750-27,500.

The Russell 2000 closed on the session low of 1,644 (-1%). Fresh and upper support at 1,650-1,635 failed to hold. A move below the latter would indicate a further backtest towards 1,630-1,615. Below is a chart of the IWM.

The Nasdaq tapped an afternoon high of 11,920 while ending at 11,895 (+0.04%). Mid-October and lower resistance at 11,900-12,000 was cleared but held for the second-straight session. A close above the latter and the early September all-time high of 12,074 signaling further momentum towards 12,100-12,200.

For the week, the Nasdaq skyrocketed 9% while the S&P 500 soared 7.3%. The Russell 2000 jumped 7% while the Dow was higher by 6.9%.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its losing streak to five-straight sessions with the late day low hitting 24.56. Current and upper support at 25-24.50 was breached and held. A close below the latter would indicate additional weakness towards 23.50-23.

Lowered resistance is at 26-26.50 followed by 28.50-29 and and the 50-day moving average.

The S&P 400 Mid Cap Index (NYSE: MID) had its four session winning streak snapped following the afternoon pullback to 2,023. Fresh and upper support at 2,025-2,000 was breached but held. A close below the latter would likely indicate a retest towards 1,975-1,950.

Resistance from early February is at 2,050-2,075.

RSI (relative strength index) has leveled out with key support at 60 holding. A close below this level would suggest weakness towards 55-50. Resistance is at 65-70.

The Spider S&P Retail ETF (NYSE: XRT) fell for the second time in three sessions with the intraday low tapping $53.52. Current and upper support at $54-$53.50 was breached and failed to hold. A close below the latter and would signal additional weakness towards $53.50-$52.

Resistance is at $54.50-$55 with the mid-October all-time peak at $55.26.

RSI is in a slight downtrend with upper support at 55-50 holding. A close below the latter would suggest weakness towards 45-40. Resistance is at 60.

With the Presidential election called by the media networks for Joe Biden, the market appears to have a near-term uncertainty removed. Although President Trump has vowed to fight the results with court orders, it may be a tough case to prove with many obstacles. How the legal process shakes out remains to be seen but the near-term action could continue to be bullish.

The technical signal to watch this week will be volatility. The VIX tested intraday lows of 24.14 and 24.03 in back-to-back sessions around mid-October while closing at 25.07 and 25. Friday’s low was at 24.56.

Continued closes below 25-24 would be a very bullish signal for continued stock market momentum. The 50-day moving average is at 28.63 and also appears to be leveling out from its recent uptrend. This is also a slightly bullish signal with market nervousness likely returning when the VIX clears 28-30.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 38-11 (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 and Text Alerts.

United States Steel (X, $9.90, up $0.24)

X December 10 calls (X201218C00010000, $0.80, up $0.10)

Entry Price: $0.70 (11/6/2020)
Exit Target: $1.40
Return: 14%
Stop Target: None

Action: Friday’s peak reached $10.24 with key resistance (green line) at $10.25 getting challenged but holding. A close above this level would be a bullish signal for a retest towards $10.50-$10.75 and prior breakout levels from early June (blue circles). Support (black line) is at $9.75-$9.50 with a close below the latter being a slightly bearish development.

The uptrend line (in orange) shows a break below the $9.25 level would be a signal to exit the trade. I would like to see a breakout towards $11 in the next couple of weeks which would technically push these options to at least $1 “in-the-money” with the strike price at $10. However, the options could reach $1.25-$1.40 with the longer-term time premium with the December calls. Friday’s high reached $1.01 with the call options.

AT&T (T, $27.44, down $0.07)

T December 28 calls (T201218C00028000, $0.60, unchanged)

Entry Price: $0.55 (10/29/2020)
Exit Target: $1.10
Return: 9%
Stop Target: None

Action: Key resistance at $27.75 (black line) that was prior support (blue circle) in late October held on Friday’s trip to $27.70. A close above the $28 level and the 50-day moving average would be a more bullish signal for continued strength. Slightly rising support (green line) is at $27.25-$27 despite the lower close.