MomentumOptions.com Pre-Market Update for 5/7/2021
Dow Sets Another Record High
The stock market traded on both sides of the ledger on Thursday before a late day rally pushed all of the major indexes into positive territory ahead of the closing bell. The gains were a slightly bullish signal ahead of Friday’s key unemployment report with expectations for a million jobs added for the month of April.
The Dow showed the most strength after tagging another all-time high of 34,561 before settling at 34,548 (+0.9%). Unchartered territory and key resistance at 34,500 was cleared and held. Continued closes above the level would suggest ongoing strength towards 34,750-35,000.
The S&P 500 traded to a late day peak of 4,202 while ending at 4,201 (+0.8%). Key resistance at 4,200 was recovered. Continued closes above this level would indicate a run towards 4,225-4,250 with the current record high at 4,218.
The Nasdaq tested an afternoon peak of 13,635 before finishing at 13,632 (+0.4%). Fresh and lower resistance at 13,700-13,850 easily held. A move above the latter would signal additional strength towards 14,000-14,150 with the late April all-time top at 14,211.
The Russell 2000 closed at 2,241 (+0.05) after tapping a high of 2,242 ahead of the final bell. Near-term and lower resistance at 2,250-2,275 was challenged but held. A close above the latter would keep a retest towards 2,300-2,325 in play. Below is a chart of the IWM.
Shares of Home Group (HOME) surged 20% after the company agreed to be acquired by Hellman & Friedman for $2.8 billion, or $36 per share in cash. Upon completion of the deal, At Home will become a privately-held company.
The Volatility Index (VIX) was down for the second-straight session despite testing a morning peak of 20.60. Current resistance at 19.50-20 and the 50-day moving average were breached but levels that held.
The fade to 18.21 challenged upper support at 18-17.50. A close below the latter heading into the weekend would be a slightly bullish signal for next week.
The SPDR S&P 500 ETF (NYSE: SPY) was higher for the second-straight session after reaching a peak of $419.21. Current and lower resistance at $419-$419.50 was recovered. A move above the latter would indicate additional strength towards $420.50-$421 with the current all-time high at $420.72.
Support is at $417.50-$416 followed by $414-$413.50. A close below $410 would signal a near-term top.
RSI (relative strength index) is back in an uptrend with lower resistance at 60-65 getting cleared and holding. A close above the latter would suggest a run towards 70-75 and the April highs. Support is at 55-50.
The Materials Select Sector Spider Fund (NYSE: XLB) extended its winning streak to four-straight sessions with the intraday record high hitting $87.06. Unchartered territory and lower resistance at $87-$87.50 was cleared and held. A move above the latter would suggest additional momentum towards $88.50-$89.
Support is at $86-$85.50.
RSI remains in an uptrend with lower resistance at 70-75 getting cleared and holding. A close above the latter would suggest further upside towards 80 and overbought levels from June 2020. Support is at 65-60.
There are whisper numbers the jobs report could push the two million mark and could lead to continued strength for the major indexes. A report under a million could signal a return to lower lows.
The Russell 2000 and the Nasdaq remain on shaky ground after testing and failing below key support levels at 2,200 and 13,500, respectively. If these two indexes can clear and hold 2,260 and 13,800 by today’s close, it would also be a slightly bullish signal for next week, providing the VIX can clear and hold the 17.50 level, as well.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 17-5 (77%). 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.
Utilities Select Sector SPDR Fund (XLU, $65.84, up $0.50)
XLU June 69 calls (XLU210618C00069000, $0.35, up $0.10)
Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Stop Target: None
Action: Shares rebounded to test a high of $65.90 with lower resistance at $65.50-$66 getting recovered. I would like to see a close above $66.50 today. Support is at $65.50-$65.