MomentumOptions.com Pre-Market Update for 4/23/2021
Volatility Spikes Towards 20
The stock market erased opening gains to trade lower on Thursday following news President Biden is set to propose a plan that could nearly double the capital gains taxes on the wealthy. The proposal would boost the rate to 39.6% for individuals earning $1 million or more, an increase from the current rate of 20%.
The continued rise in coronavirus cases globally, notably the surge in India, also weighed on sentiment as the possibility of a delay to the expected global recovery rises along with infections. Meanwhile, volatility spiked to its highest level since late March while holding a key level of resistance.
The Dow tested an intraday low of 33,717 before settling at 33,815 (-0.9%). Current and upper support at 33,750-33,500 was tripped but held. A close below the latter would indicate a further drop towards 33,250-33,000.
The Nasdaq tapped an afternoon low of 13,771 while closing at 13,818 (-0.9%). Near-term and upper support at 13,800-13,650 was breached but held. A drop below the latter would signal a retest towards 13,500-13,350.
The S&P 500 ended at 4,134 (-0.9%) after testing a low of 4,123. Upper support at 4,125-4,100 was breached but held. A move below the latter would suggest additional weakness towards 4,075-4,050.
The Russell 2000 finished at 2,232 (-0.3%) with the second half low reaching 2,227. Prior and upper support at 2,225-2,200 was challenged but held. A close below the latter would likely lead to a further pullback towards 2,175-2,150 with Tuesday’s and the monthly low at 2,171. Below is a chart of the IWM.
Shares of AT&T (T) rose 4% after topping first-quarter earnings and revenue estimates. The company also reported 2.7 million total domestic HBO Max and HBO subscriber net adds in Q1.
The iPath S&P Vix Short-Term Futures (NYSE: VIX) was up for the third time in four sessions with the midday peak hitting 19.90. Current and lower resistance at 19.50-20 was breached but held. A pop above the latter would signal ongoing strength towards 20.50-21 and the 50-day moving average.
Fresh support is at 18.50-18.
The S&P 400 Mid Cap Index (NYSE: MID) was down for the third time in four sessions despite tagging an all-time opening high of 2,734. Key resistance is at 2,725 was cleared but held.
The fade to 2,693 afterwards breached but held upper support at 2,700-2,675. A move below the latter would indicate additional weakness towards 2,650-2,625.
RSI (relative strength index) is showing signs of rolling over key support at 60 failing to hold. Continued closes below this level would signal weakness towards 55-50. Resistance is at 65-70.
The SPDR Gold Shares (NYSE: GLD) had its two session winning streak snapped following the pullback to $166.49. Near-term and upper support at $166.50-$166 was breached but held. A close below the latter would signal additional downside risk towards $165-$164.50.
Resistance is at $167.50-$168.
RSI is back in a downtrend with key support at 60 failing to hold. There is risk towards 55-50 on continued weakness. Resistance is at 65-70.
I mentioned the current action would test our patience but the key would be if the VIX could hold 20. Yesterday’s run towards this level was the third time this week it has been tested. Today’s action will be crucial as a sign if next week will continue to be bearish.
It will take a hail Mary for the bulls to win the week as the Nasdaq needs a 234 point rebound to get back to even. The Russell 2000 needs 31 points for a positive week. A higher close, or a 1%+ rally, would indicate a possible strong finish to the month of April.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 16-4 (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.
Archer Daniels Midland Company (ADM, $58.87, down $0.96)
ADM May 60 calls (ADM210521C00060000, $1.05, down $0.40)
Entry Price: $1.15 (4/16/2021)
Exit Target: $2.30
Stop Target: None
Action: Yesterday’s low kissed $58.74 with current and upper support at $59-$58.50 failing to hold. A close below the latter would suggest weakness towards $58-$57.50 and the 50-day moving average. Resistance is at $59.50-$60 with Wednesday’s all-time peak at $59.94.
iShares MSCI Emerging Markets ETF (EEM, $53.85, down $0.19)
EEM May 55 calls (EEM210521C00055000, $0.60, unchanged)
Entry Price: $1.00 (4/5/2021)
Exit Target: $2.00
Stop Target: None
Action: Shares tested a late day high of $54.19 before settling in the red. Lower resistance at $54.25-$54.75 and the 50-day moving average were challenged but held. Support is at $53.50-$53.