MomentumOptions.com Pre-Market Update for 5/10/2021

Bulls Overlook Disappointing Jobs Report

8:00am (EST)

The stock market showed continued momentum on Friday with the S&P 500 and Dow reaching another round of record highs despite a disappointing April jobs report. Specifically, the jobs report showed that U.S. employers brought back just 266,000 jobs in April, versus forecasts for one million.

It was the biggest miss in 23 years as the unemployment rate unexpectedly rose to 6.1%, widening further from its pre-pandemic level of 3.5%. Treasury yields helped fuel bullish sentiment after immediately sinking following the news, with the 10-year yield hovering below 1.58%.

The S&P 500 settled at 4,232 (+0.7%) after testing an intraday record high of 4,238. New and lower resistance at 4,225-4,250 was breached and held. A close above the latter would signal additional momentum towards 4,275-4,300.

The Dow extended its winning streak to five-straight sessions after closing at 34,777 (+0.7%) while tagging a fresh all-time peak of 34,811. Unchartered territory and key resistance at 34,750 was cleared and held. Continued closes above this level would indicate ongoing strength towards 35,000.

The Nasdaq went out at 13,752 (+0.9%) with the morning peak hitting 13,828. Key and lower resistance at 13,750-13,900 was recovered. A pop above the latter would suggest additional upside towards 14,000-14,150 with the last month’s all-time top at 14,211.

The Russell 2000 finished on its session peak at 2,271 (+1.4%). Key resistance at 2,275 was challenged but held. A close above this level would indicate another push towards 2,300-2,325. Below is a chart of the IWM.

Market Movers

DraftKings (DKNG) shares fell nearly 7% despite reporting a revenue beat for the quarter as the company lost 36 cents a share versus forecasts for a loss of 42 cents. DraftKings also raised its 2021 revenue view to $1.05-$1.15 billion from $900 million-$1 billion.

Volatility Index

The Volatility Index (VIX) fell for the third-straight session after tapping a late day low of 16.68. Prior and upper support at 17-16.50 was recovered. A close below the latter would suggest a retest towards 16-15.50 with the 52-week and mid-April low at 15.38.

Resistance is at 17.50-18 followed by 19.50-20 and the 50-day moving average.

Market Analysis

The iShares Russell Growth 1000 ETF (NYSE: IWF) was up for the second-straight session with the high hitting $258.40. Prior and lower resistance at $258-$258.50 was breached but failed to hold. A pop above the latter would indicate further strength towards $259.50-$260 with the late April peak at $263.21.

Fresh support is at $256.50-$256 followed by $255-$254.50.

RSI is back in an uptrend with key resistance at 50 getting cleared and holding. Continued closes above this level would signal additional strength towards 55-60. Support is at 45.

Sector

The Financial Select Sector Spider Fund (NYSE: XLF) extended its winning streak to five-straight sessions after trading to an all-time peak of $37.79. Unchartered territory and lower resistance at $37.50-$38 was cleared and held. A close above the latter would indicate continued momentum towards $38.50-$39.

Support is at $37.25-$37.

RSI remains in an uptrend with key resistance at 75 getting breached and holding. Continued close above this level would suggest upside towards 80 and the late February high. Support is at 70.

Market Outlook

The Russell 2000 and the Nasdaq cleared 2,260 and 13,800 during Friday’s action and two key levels I wanted to see hold. Although the latter just missed holding this level, the action was bullish nonetheless along with the VIX recovering the 17.50 level. The lousy jobs report was likely an indication the Fed won’t be raising interest rates anytime soon and why the bulls showed continued momentum.

With the Dow and S&P 500 setting fresh record highs, it is likely Tech and the small-caps will follow this trend on continued strength. The drop in the 10-year yield was also a bullish signal leading into this week and should provide an opportunity to get into 1-2 new trades. If I take action after the open, or at some point this afternoon, look for a Trade Alert along with a Text message.

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, $66.04, up $0.20)

XLU June 69 calls (XLU210618C00069000, $0.35, unchanged)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None

Action: Shares were up for the second-straight session with the high reaching $66.54. Lower resistance at $66.50-$67 was cleared but held. Support is at $66.50-$66.