MomentumOptions.com Pre-Market Update for 1/4/2021
Market Mostly Higher on Last Day of Trading for 2020
The market traded on both sides of the ledger while closing mostly higher on Thursday and the last trading day for 2020. The small-caps slacked and volume was light despite a late day rally as most investors took early vacations to prepare for the full slate of trading this week.
The gains helped set another round of lifetime highs for the Dow and the S&P 500 as the major indexes closed higher for the second-straight month while wrapping up a strong 2020.
The Dow closed at 30,606 (+0.7%) while trading to an all-time high of 30,637. New and lower resistance at 30,500-30,750 was cleared but held. A close above the latter would signal further upside towards 31,000-31,250.
The S&P 500 traded to a late day record peak of 3,760 before ending at 3,756 (+0.6%). Uncharted territory and lower resistance at 3,750-3,775 was breached and held. A close above the latter would indicate additional momentum towards 3,800-3,825.
The Nasdaq traded mostly in the red before a late day surge to 12,902 and finish at 12,888 (+0.1%). Current and lower resistance at 12,900-13,000 was cleared but held. A move above the latter and last Tuesday’s all-time high at 12,973 would suggest additional strength towards 13,100-13,200.
The Russell 2000 tapped an opening low of 1,963 before settling at 1,974 (-0.3%). Current and upper support at 1,975-1,950 was tripped and failed to hold. A close above the latter would indicate a retest towards 1,945-1,920. Below is a chart of the IWM.
For the year, the Nasdaq skyrocketed 43.6%; the Russell 2000 zoomed 18.2%; the S&P 500 soared 16.3%; and the Dow gained 7.3%.
The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) was down for the second-straight session after testing an opening low of 21.24. Near-term and upper support at 21.50-21 was breached but held. A move below the latter would signal further weakness towards 20.50-20.
Resistance remains at 23.50-24 followed by 25-25.25 and the 50-day moving average.
The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) was up for the second-straight session after trading to an afternoon high of $306.29. Uncharted territory and lower resistance at $306-$306.50 was cleared but held. A move above the latter and would signal a possible breakout towards the $307.50-$308 area.
Support is at $303.50-$303 followed by $302.50-$302.
RSI is in an uptrend with lower resistance at 65-70 getting cleared and holding. A close above the latter and the early November peak would suggest strength towards 75 and late August/ early September top. Support is at 60-55.
The Communication Services Select Sector SPDR (NYSE: XLC) snapped a two-session slide after tagging a second half high of $67.59. Near-term and lower resistance is at $67.50-$68 was breached but held. A close above the latter and this week’s record high at $67.81 would suggest further strength towards $69-$69.50.
Support is at $66.50-$66 followed by $65-$64.50 and the 50-day moving average.
RSI is back in a slight uptrend after clearing and holding key resistance at 60. Continued closes above this level would signal strength towards 65-70 and prior levels from early December. Support is at 55-50 with the latter representing the monthly low.
Volatility has traded between 20-25 since mid-November with only one close above the 25 level that occurred on December 21st with the intraday peak tagging 31.46. On the flip side, volatility has not closed below the 20 level since February 21st despite the major indexes testing fresh all-time highs throughout November and December.
Historically, volatility trades around the 20 level but with all-time highs typically trades in the low teens, and sometimes into the single-digits. Heading into January, the 20 and 25 levels should be the first clues on how the month could unfold.
Aside from the political races in Georgia, and the certification of the electoral votes by Congress that will be decided the second week in January, the fourth-quarter earnings season will start the following week.
These events will certainly be market moving and will likely shape the outcome on how January plays out. Multiple closes below the 20 level would signal a continued run towards fresh all-time highs for the major indexes. However, consecutive closes above the 25 level would likely indicate upcoming market weakness.
I have updated our current trades so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 0-0 (0%). 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.
Cisco Systems (CSCO, $44.75, up $0.25)
CSCO February 48 calls (CSCO210219C00048000, $0.60, up $0.05)
Entry Price: $0.60 (12/28/2020)
Exit Target: $1.20
Stop Target: None
Action: Shares traded to a high of $44.84 lower resistance at $44.75-$45 getting cleared and holding. Continued closes above the latter would be a more bullish setup for continued strength. Support is at $44.50-$44.25.
AT&T (T, $28.76, up $0.27)
T February 30 calls (T210219C00030000, $0.50, up $0.05)
Entry Price: $0.48 (12/22/2020)
Exit Target: $1.00
Stop Target: None
Action: Thursday’s rebound reached $28.80 with lower resistance at $28.75-$29 and the 50-day moving average getting recovered. Support is at $28.50-$28.25.
Boston Scientific (BSX, $35.95, up $0.40)
BSX February 31 puts (BSX210219P00031000, $0.30, down $0.05)
Entry Price: $0.85 (12/14/2020)
Exit Target: $1.70
Stop Target: None
Action: Prior and lower resistance at $36-$36.25 was cleared but held with the intraday peak hitting $36.01. Rising support is at $35.50-$35.25.