Pre-Market Update for 12/14/2020

Small-Caps Show Strength in Down Week

8:00am (EST)

The stock market traded on both sides of the ledger on Friday before closing mostly lower as hopes for another stimulus package continue to fade. Negotiations broke down once again over the liabilities faced by businesses in relation to the coronavirus with Senate Majority Leader McConnell adding Democrats are holding the Paycheck Protection Program hostage over controversial state government bailouts while family businesses are closing their doors.

The Russell 2000 tested an intraday low of 1,896 while closing at 1,911 (-0.6%). Current and upper support at 1,900-1,880 was breached but held. A move below the latter would suggest continued weakness towards 1,870-1,850. Below is a chart of the IWM.

The Nasdaq settled at 12,377 (-0.2%) with the midday low tagging 12,246. Near-term and upper at 12,300-12,200 was tripped but held. A close below the latter would signal a continued pullback towards 12,100-12,000.

The S&P 500 ended at 3,663 (-0.1%) following the intraday fade to 3,633. Current and upper support at 3,650-3,625 was breached but held. A drop below the latter would suggest a further retest towards 3,600-3,575.

The Dow traded to an afternoon low of 29,820 before finishing at 30,046 (+0.2%). Near-term and upper support 27,750-29,500 was challenged but easily held. A move below the latter would suggest a retest towards 29,250-29,000.

For the week, the S&P 500 dropped 1% and the Nasdaq was off 0.7%. The Dow was down 0.6% and the Russell 2000 gained 1.1%.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was up for the third-straight session with the intraday peak hitting 25.14. Prior and lower resistance from mid-November at 25-25.50 was breached but held. A close above the latter would suggest additional upside towards 26-26.50 and the 50-day moving average.

Rising support is at 23-22.50.

The SPDR S&P 500 ETF (NYSE: SPY) extended its losing streak to three-straight sessions with the midday low reaching $363.26. Near-term and upper support at $363.50-$363 was breached but held. A close below the latter and would suggest a further slide towards $362-$361.50.

Lowered resistance is at $366.50-$367 followed by $368-$368.50.

RSI is in a slight downtrend with key support at 60 holding. A move below the latter would signal a retest towards 55-50 and levels from early November. Resistance is at 65-70.

The iShares MSCI Emerging Markets ETF (NYSE: EEM) remains in a six-session trading range following the intraday pullback to $50.63. Current and upper support at $50.50-$50 was challenged but held. A close below the latter would be a slightly bearish signal for additional weakness towards $49.50-$50.

Key resistance is at $51 with the recent 52-week peak at $51.14.

RSI is in a downtrend after failing to hold upper support at 65-60. A move below the latter would indicate weakness towards 55-50. Resistance is at 70-75.

I could have New Trades today but I’m hesitant on the current action and a retest towards all-time highs. The market is showing signs of topping out with volatility making higher highs but I want to make sure key support levels fail to hold before possibly going short with put options.

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.

Grocery Outlet Holding (GO, $38.00, up $0.33)

GO January 40 calls (GO210115C00040000, $0.95, up $0.05)

Entry Price: $1.00 (11/30/2020)
Exit Target: $2.00
Return: -5%
Stop Target: None

Action: Lower resistance at $38-$38.25 was recovered with Friday’s high tapping $37.19. A close above the latter and the 200-day moving average would be a more bullish signal for a retest towards the $39 level. Support is at $37.75-$37.50.