Pre-Market Update for 12/11/2020

Market Settles Mixed After Weak Open/ Profit Alert (T)

8:00am (EST)

The stock market settled mixed on Thursday following a weak open as traders awaited updates on a possible stimulus plan out of Washington and approval from the FDA on the coronavirus vaccine. The tight trading ranges are signaling a consolidation pattern for the major indexes following the breakout to record peaks to start the month.

The Russell 2000 finished at 1,922 (+1.1%) after tapping an intraday high of 1,924. Current and lower resistance at 1,920-1,940 was cleared and held. A move above the latter and the all-time peak at 1,935 would indicate continued strength towards 1,960-1,980.

The Nasdaq ended at 12,405 (+0.5%) with the session peak hitting 12,431. Near-term and lower resistance at 12,400-12,500 was recovered. A close above the latter would signal continued upside towards 12,600-12,700 with the current all-time top at 12,607.

The S&P 500 closed at 3,668 (-0.1%) following the morning backtest to 3,645. Current and upper support at 3,650-3,625 was breached but held. A close below the latter would indicate further weakness towards 3,625-3,600.

The Dow traded to an opening low of 29,876 before settling at 29,999 (-0.2%). Near-term and upper support 30,000-29,750 was breached but failed to hold. A move below the latter would suggest a retest towards 29,500-29,250.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the second-straight session after trading to an first half high of 23.46. Prior and lower resistance at 23-23.50 was breached but held. A close above the latter would signal additional upside towards 24-24.50.

Current and slightly rising support is at 21.50-21 followed by 20.50-20.

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) fell for the second-straight session following the intraday fade to $299.20. Current and upper support at $299.50-$299 was breached but held. A close above the latter would signal additional weakness towards $298-$297.50.

Current resistance is at $301-$301.50 followed by $302.50-$303.

RSI is back in a downtrend with key support at 60 holding. A close below this level would suggest additional weakness towards 55-50 and levels from early November. Resistance is at 65-70.

The Industrials Select Sector SPDR Fund (NYSE: XLI) had its two-session winning streak snapped and remains in a 13-session trading range following the pullback to $88.17. Near-term and upper support at $88.50-$88 was breached but held. A close below the $87.50 level would be a slightly bearish signal and would indicate additional weakness towards $86.50-$86.

Resistance is at $89.50-$90 with the late November all-time peak at $90.16.

RSI is in a slight downtrend with support at 60 holding. This level has held since mid-November with a move below 60 signaling ongoing weakness towards 55-50. Resistance is at 65-70.

Volatility remains a slight concern moving forward despite the stock market’s run to record highs this month. Historically, volatility trades around the 20 level and moves into the mid to low teens on record highs.

The recent action has shown the 20 level holding holding in eight of the past 10 sessions with the late November low tagging 19.51 and the lowest close at 20.57.

The good news is the aforementioned charts for the major indexes are showing a consolidation pattern this month following the breakout to record peaks. However, lower lows could be in store if the bottom of these trading ranges are breached.

Specifically, for the Dow a move below 29,500 would be troublesome and signal a near-term top while a close below 3,550 on the S&P 500 would suggest the same. For the Nasdaq, a move below the 12,000 area would indicate further weakness and for the Russell 2000 a drop below 1,850 could also signal a further pullback.

On that note, I have updated our current trades so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2020: 44-11 (80%). 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, $30.69, down $0.77)

T January 30 calls (T210115C00030000, $1.80, up $0.55)

Entry Price: $0.40 (12/3/2020)
Exit Target: $1.60, raise to $3.00
Return: 250%
Stop Target: $1.60 on half and $1.20 on the other half (Stop Limits)

Action: Both Stop Limits were triggered on yesterday’s fade to $30.48.

Grocery Outlet Holding (GO, $37.67, down $0.06)

GO January 40 calls (GO210115C00040000, $0.90, flat)

Entry Price: $1.00 (11/30/2020)
Exit Target: $2.00
Return: -10%
Stop Target: None

Action: Current and upper support at $37.25-$37 was breached but held with yesterday’s low tapping $37.01. Resistance remains at $37.75-$38.25 and the 200-day moving average.