MomentumOptions.com Pre-Market Update for 5/26/2021

S&P 500 Fails to Hold 4,200 Level

8:00am (EST)

The stock market traded on both sides of the ledger on Tuesday following a disappointing update on new home sales which declined 5.9% to a 863,000 rate in April. Other housing news was mostly positive as the FHFA home price index rose 1.4% to 324.9 while the S&P Case-Shiller 20-city home price index gained 2.2% to 251.6.

The slightly lower close was a disappointment but remains a bullish signal after higher highs on the open and keeps a possible run towards previous all-time highs in play. Meanwhile, volatility edged higher but held a fresh level of resistance to confirm this thesis.

The Nasdaq slipped four points to settle at 13,657 (-0.03%) with the low tagging 13,631. Current and upper support 13,650-13,500 was breached but held. A close below the latter and the 50-day moving average would indicate additional weakness towards 13,400-13,250.

The S&P 500 closed at 4,188 (-0.2%) with the intraday low tapping 4,182. Near-term and upper support at 4,175-4,150 was tripped but held. A drop below the latter would signal a further pullback towards 4,125-4,100 and the 50-day moving average.

The Dow ended at 34,312 (-0.2%) after bottoming at 34,266. Upper support at 34,250-34,000 was challenged but held. A close below the latter would likely lead to a further fade towards 33,750-33,500 and the 50-day moving average.

The Russell 2000 finished at 2,205 (-1%) and the session low. Current and upper support at 2,225-2,200 failed to hold. A move below the latter would suggest a retest towards 2,175-2,150. Below is a chart of the IWM.

Market Movers

Shares of Lordstown Motors (RIDE) lost 7% after reporting a wider loss than Wall Street had expected along with higher cash consumption for the first quarter. The company also reduced its forecasts and discussed a need for additional capital in its conference call.

Volatility Index

The Volatility Index (VIX) snapped a three-session slide after trading to an intraday peak of 19.29. Fresh and lower resistance at 19-19.50 and the 50-day moving average were breached but levels that held.

Support is at 17.50-17.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) fell for the first time in four sessions with the intraday low reaching $342.66. Prior and upper support at $343-$342.50 was tripped but held. A close below the latter would signal additional weakness towards the $341-$340.50 area.

Resistance is at $345-$345.50 followed by $347-$347.50.

RSI is back in a slight downtrend with upper support at 55-50 holding. A move below the latter would indicate weakness towards 45-40. Resistance is at 60.

Sector

The Spider S&P Retail ETF (NYSE: XRT) had its two-session winning streak snapped following the pullback to $90.89. Near-term and upper support at $91-$90.50 was breached but held. A close below the latter would suggest a further slide towards $89-$88.50.

Resistance is at $91.50-$92 and the 50-day moving average.

RSI has flatlined with key resistance at 50 holding. A close above this level would suggest strength towards 55-60 with the latter holding since late March. Support is at 45-40.

Market Outlook

The small-caps made a break above the 50-day moving average but led yesterday’s losses. It will be crucial to see the index clear and hold this level this week and ahead of a three-day weekend. If not, it could be an early warning signal for continued choppiness into June.

NVIDIA Corp. (NVDA) will announce numbers after today’s closing bell with the company recently announcing a four-for-one stock split. There are a few analysts that believe a beat-and-raise quarter is in store which could be bullish news for the chip sector on Thursday.

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.

Marathon Oil (MRO, $11.66, down $0.31)

MRO July 12 calls (MRO210716C00012000, $0.75, down $0.20)

Entry Price: $0.85 (5/24/2021)
Exit Target: $1.70
Return: -12%
Stop Target: None

Action: Yesterday’s low kissed $11.64 with upper support at $11.75-$11.50 failing to hold. Resistance remains at $12-$12.25.

Western Union (WU, $24.29, down $0.41)

WU June 26 calls (WU210618C00026000, $0.15, down $0.05)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -78%
Stop Target: None

Action: Tuesday’s low touched $24.28 with upper support at $24.50-$24.25 failing to hold. Resistance is at $24.75-$25.

Intel (INTC, $56.87, down $0.09)

INTC June 60 calls (INTC210618C00060000, $0.40, down $0.05)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -38%
Stop Target: None

Action: Shares traded up to $57.56 before closing slightly in the red. Prior and lower resistance at $57.50-$58 was cleared but held. Support remains at $56.50-$56.

Utilities Select Sector SPDR Fund (XLU, $65.24, down $0.80)

XLU June 69 calls (XLU210618C00069000, $0.20, down $0.05)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -69%
Stop Target: None

Action: Shares made a backtest to $65.09 with upper support at $65.50-$65 failing to hold. A close below the latter and the 50-day moving average will likely force us out of the trade. Lowered resistance at $66-$66.50.