MomentumOptions.com Pre-Market Update for 5/20/2021

Market Extends Losses for a Third-Straight Day

8:00am (EST)

The stock market extended its losing streak to three-straight sessions on Wednesday as concerns over inflation remained in play. The rebound of the opening lows came ahead of the latest Fed minutes which didn’t reveal any major surprises although the meeting was held prior to the April jobs disappointment and the spike in the Consumer Price Index.

The policy update reinforced that most members did not think quantitative easing tapering or rate increases were needed over the near-term. The dovish tone helped Tech into positive territory, briefly, ahead of the closing bell with volatility also relaxing off its intraday peak.

The Nasdaq slipped four points to settle at 13,299 (-0.03%) after tagging a morning low of 13,072. Current and upper support 13,150-13,000 was breached but held. A drop below the latter would indicate additional weakness towards 12,900-12,750.

The S&P 500 closed at 4,115 (-0.3%) with the intraday low tapping 4,061. Near-term and upper support at 4,075-4,050 and the 50-day moving average were tripped but levels that held. A close below the latter would signal a further pullback towards 4,025-4,000.

The Dow ended at 33,896 (-0.5%) after bottoming at 33,473. Key support at 33,500 and the 50-day moving average were breached but held. A close below this level would likely lead to a further fade towards 33,250-33,000.

The Russell 2000 finished at 2,193 (-0.8%) with the opening low hitting 2,159. Prior and upper support at 2,175-2,150 was triggered but held. A move below the latter would suggest a retest towards 2,125-2,100. Below is a chart of the IWM.

Market Movers

Shares of Coinbase (COIN) fell 6% with the low at $208 following partial outages on its website and mobile app. The company said it was investigating intermittent downtime on its platforms after applying a fix amid the selloff in cryptocurrencies, most notably bitcoin.

Volatility Index

The Volatility Index (VIX) was up for the third-straight session with the intraday high reaching 25.96. Prior and lower resistance at 25.50-26 was breached but held. A close above the latter would indicate a retest towards 28.50-29 with last week’s peak at 28.93.

Fresh support is at 22-21.50 followed by 19.50-19 and the 50-day moving average.

Market Analysis

The Wilshire 5000 Composite Index (NYSE: WLSH) extended its losing streak to three-straight sessions following the pullback to 42,293. Near-term and upper support at 42,500-42,250 was breached but held. A drop below the latter and last week’s low at 42,146 would be a bearish development with ongoing weakness towards 42,000-41,750.

Lowered resistance is at 43,000-43,250.

RSI (relative strength index) remains inna downtrend with upper support at 45-40 holding. A close below the latter would suggest weakness towards 35 and levels from last October. Key resistance is at 50.

Sector

The Consumer Discretionary Select Spiders (NYSE: XLY) was down for the third-straight session with the morning low at $165.49. Fresh and upper support at $165.50-$165 was breached but held. A close below the latter would likely signal a further slide towards $163-$162.50 and levels from late March.

New resistance is at $167.50-$168 followed by $170-$170.50.

RSI has rolled over with upper support at 35-30 holding. A close below the latter would signal a retest towards 25-20 and oversold levels from February 2020. Resistance is at 40.

Market Outlook

It remains to be seen if the market follows last week’s patter and bounces back after three-straight down days. Futures were slightly lower after midnight when I was finishing up my research and the action just feels like lower lows might come into play.

There were a couple of charts I did on Monday night that were crucial in helping me determine key support levels and how the market might unfold this week.

One of them from was the chart below on the Dow. As you see, this was done after Monday’s close and shows the index in an upward channel since early November. In it, I noted key support for the blue-chips was at 33,500 and the 50-day moving average with a close below these levels signaling lower lows.

Yesterday’s low on the Dow hit 33,473. While these levels were stretched, it will be crucial they hold again today with a close back above 34,000 being just as important.

The other chart showed Apple (AAPL) in a downward sloping channel with key support at $123 and the 200-day moving average. Yesterday’s low tapped $122.86 with both levels holding into the closing bell.

If both Apple and the Dow fail to hold the aforementioned support levels, the overall market could slide another 3%-5% depending on the selling pressure and how volatility reacts.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 17-6 (74%). 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, $24.79, down $0.07)

WU June 26 calls (WU210618C00026000, $0.25, down $0.05)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -62%
Stop Target: None

Action: Wednesday’s low kissed $24.17 with prior and upper support from late March at $24.25-$24 getting tripped but holding. Resistance is at $25-$25.25 and the 50-day moving average.

Intel (INTC, $55.36, up $0.52)

INTC June 60 calls (INTC210618C00060000, $0.35, up $0.05)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -46%
Stop Target: None

Action: Shares tagged a low of $53.84 before rebounding to close higher. Upper support at $54-$53.50 was breached but held. Resistance remains at $55.50-$56.

Utilities Select Sector SPDR Fund (XLU, $65.25, down $0.11)

XLU June 69 calls (XLU210618C00069000, $0.25, unchanged)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -62%
Stop Target: None

Action: Yesterday’s low hit $64.49 with near-term support at $65-$64.50 and the 50-day moving average getting breached but levels that held. Resistance is at $65.50-$66.