MomentumOptions.com Pre-Market Update for 1/22/2021

Small-Caps Slack as Major Indexes Tag Record Highs

8:00am (EST)

The stock market continued its recent momentum after rallying to fresh record highs again on Thursday despite slightly disappointing economic news. A combination of upbeat earnings and expectations that vaccines, government stimulus and the Fed’s commitment to maintain extraordinary accommodation can help the economy rebound later this year helped ongoing sentiment.

The Nasdaq tested a late day peak of 13,560 while finishing at 13,530 (+0.6%). Uncharted territory and lower resistance at 13,500-13,600 was cleared and held. A move above the latter would suggest additional momentum towards 13,700-13,800.

The S&P 500 traded to an intraday high of 3,861 before ending at 3,853 (+0.03%). New and lower resistance at 3,875-3,900 was challenged but held. A close above the latter would signal additional strength towards 3,900-3,925.

The Dow settled at 31,176 (-0.04%) despite trading to a record high of 31,272. Near-term and lower resistance at 31,250-31,500 was cleared but held. A close above the latter would suggest further upside towards 31,750-32,000.

The Russell 2000 tapped an midday low of 2,138 before closing at 2,141 (-0.9%). Fresh and upper support at 2,150-2,125 was breached and failed to hold. A close below the latter would indicate additional weakness towards 2,100-2,075.

In economic news, Initial Jobless Claims fell -26,000 to 900,000 versus the prior week’s 142,000 surge to 926,000. The four-week moving average rose to 848,000 versus 824,500 previously. Continuing claims dropped -127,000 to 5,054,000 after rising 109,000 to 5,181,000.

Housing Starts rose 5.8% to 1,669,000 in December, following the 3.1% pop to 1,578,000 in November. This represented the fourth-straight monthly increase and is the highest level since late 2006.

Building permits increased 4.5% to 1,709,000 in December after November’s 5.9% jump to 1,635,000. All of the strength was in the single family area, which soared 12%, while multifamily starts dropped -13.6% following respective increases of 1.4% and 9.1%.

Philadelphia Fed Business Outlook Survey rebounded to 17.4 points to 26.5 in January, after dropping -11.6 points to 9.1 in December. Gains were broad-based with the employment index surging to 22.5 from 5.6. The workweek edged up to 18.6 from 15.5. New orders zoomed to 30 from 1.9. Prices paid nearly doubled to 45.4 versus 24.9 previously and prices received more than doubled to 36.6 from 16.1. The 6-month activity index rose to 52.8 from 43.1 although the future employment gauge dipped to 38.9 from 41.3. New orders were unchanged at 47.5. Prices paid dipped to 41.3 from 45.1, with prices received slipping to 33.9 from 34.3.

The iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) had its three session winning streak snapped following the intraday pullback to $151.10. Prior and upper support is at $151.50-$151 was breached and failed to hold. A close below the latter would indicate a retest towards $150.50-$150 with the monthly low at $149.93.

Lowered resistance is at $152-$152.50 followed by $153.50-$154.

The iPath S&P Vix Short-Term Futures (NYSEArca: VIX) extended its losing streak to 3-straight sessions after testing a late day low of 21.09. Near-term and upper support at 21.50-21 was recovered with additional downside hurdles at 20.50-20.

Resistance remains at 22.50-23 and the 50-day moving average.

The Spider Small-Cap 600 ETF (NYSE: SLY) fell for the first time in three session with the intraday low reaching $86.30. Current and upper support at $86.50-$86 was breached but held. A close below the $85 level would likely suggest a near-term top with additional pullback potential towards the $83.50-$83 area.

Resistance is at $87.50-$88 with Wednesday’s all-time high at $88.05.

RSI (relative strength indicator) has rolled over with upper support at 65-60 holding. A close below the latter would indicate additional weakness towards 55-50 and levels from early November. Resistance is at 70-75.

The SPDR S&P Homebuilders ETF (NYSE: XHB) extended its winning streak to three-straight sessions following the first half run to $63.71 and fresh all-time high. Uncharted territory and lower resistance at $63.50-$64 was cleared but held. A close above the latter would signal additional momentum towards the $65-$65.50 area.

New support is at $62.50-$62 followed by $61-$60.50.

RSI remains in an uptrend after clearing key resistance at 70. Continued closes above this level would suggest additional strength towards 75-80 and levels from August. Support is at 65-60.

I have updated our current trades so let’s go check the tape.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 2-0 (100%). 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.

Western Union (WU, $22.03, up $0.07)

WU March 23 calls (WU210319C00023000, $0.65, up $0.05)

Entry Price: $0.65 (1/21/2021)
Exit Target: $1.30
Return: 0%
Stop Target: None

Action: Shares tagged a high of $22.19 with lower resistance at $22-$22.25 getting cleared and holding. Support is at $21.75-$21.50.

MGM Resorts International (MGM, $31.53, up $0.47)

MGM February 34 calls (MGM210219C00034000, $0.95, up $0.10)

Entry Price: $0.80 (1/13/2021)
Exit Target: $1.60
Return: 19%
Stop Target: None

Action: Thursday’s high reached $31.68 with lower resistance at $31.50-$31.75 getting cleared and holding. Slightly rising support is at $31.25-$31.

AT&T (T, $28.83, down $0.13)

T February 31 calls (T210219C00031000, $0.20, down $0.05)

Entry Price: $0.40 (1/6/2021)
Exit Target: $0.80
Return: -50%
Stop Target: None

Action: Shares tagged a low of $28.76 with key support at $28.75 and the 50-day moving average getting breached but holding for the 2nd-straight session. Resistance remains at $29-$29.25.

Boston Scientific (BSX, $37.52, up $0.86)

BSX February 31 puts (BSX210219P00031000, $0.10, down $0.05)

Entry Price: $0.85 (12/14/2020)
Exit Target: $1.70
Return: -88%
Stop Target: None

Action: Shares traded to a high of $37.74 with fresh and lower resistance at $37.50-$37.75 getting cleared and holding. New support is at $37-$37.25 and the 200-day moving average.