MomentumOptions.com Pre-Market Update for 6/7/2021

Bulls Shrug Off Employment Data

8:00am (EST)

The stock market rebounded on Friday despite slightly disappointing economic news as non-farm payrolls rose by 559,000 versus forecasts for a print of 650,000. Meanwhile, the unemployment rate fell to a new pandemic-era low of 5.9% following a drop in the labor force participation rate.

Wall Street took the numbers in stride as it suggested the economy has not yet recovered enough to warrant a change in the Fed’s current monetary policy stance. The gains capped a bullish week the major indexes with volatility closing back below a key level of support.

The Nasdaq closed at 13,814 (+1.5%) with the high hitting 13,826. Near-term and lower resistance at 13,800-13,950 was cleared and held. A move above the latter would signal upside towards 14,000-14,150 with the late April lifetime peak at 14,211.

The S&P 500 made an afternoon run to 4,233 before ending at 4,229 (+0.9%). Key resistance at 4,225 was recovered. Continued closes above this level and the early May all-time high at 4,238 would be a bullish development with breakout potential towards 4,250-4,275.

The Dow settled at 34,756 (+0.5%) after tagging an intraday high of 34,772. Key resistance at 34,750 was recovered. Continued closes above this level would suggest a retest towards 35,000 with the all-time high from early May at 35,091.

The Russell 2000 traded to an opening peak of 2,293 while finishing at 2,286 (+0.3%). Key resistance from late April at 2,300 was challenged but held for the fourth-straight session. A close above this level would indicate additional upside towards 2,325-2,350 with the March record high at 2,360. Below is a chart of the IWM.

Market Movers

Shares of PagerDuty (PD) sank 13% after announcing first-quarter numbers. The company reported a loss of eight cents a share on revenue just below $64 million. Forecasts were for a loss of nine cents on revenue of $62 million.

Volatility Index

The Volatility Index (VIX) was down for the second time in three sessions with the low tapping 16.18. Current and upper support at 16.50-16 was recovered. A close below the latter would suggest a retest towards 15.50-15 with the 52-week low at 15.38.

Resistance is at 17-17.50 followed by 18.50-19 and the 50-day moving average.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) rose for the sixth time in seven sessions with the intraday peak reaching $347.99. Near-term and lower resistance at $347.50-$348 was reclaimed. A close above the latter would signal additional strength towards the $349.50-$350 area with the all-time high at $351.09.

Support is at $348-$347.50 followed by $346-$345.50.

RSI is back in an uptrend with lower resistance at 60-65 getting cleared and holding. A move above the latter would indicate upside towards 70-75 and the April highs. Support is at 55-50.

Sector

The Real Estate Select Sector SPDR Fund (NYSE: XLRE) was up for the fourth time in five sessions with the all-time high hitting $44.73. Uncharted territory and lower resistance at $44.50-$45 was cleared and held. A close above the latter would suggest additional strength towards $46-$46.50.

New support is at $44-$43.50.

RSI has leveled out with resistance at 75 holding. A move above this level would suggest a retest towards 80 and overbought levels from late April. Key support is at 70.

Market Outlook

The S&P 500 came within five points of setting another record high on Friday and the Dow is less than 1% away from all-time highs. The Nasdaq is just over 2% from making new all-time highs while the Russell 2000 is roughly 3% away from joining the party.

I mentioned on Friday volatility needs to fall below the 15 level and fresh 52-week lows for the overall market to trigger new highs across the board. However, it wouldn’t be surprising to see the S&P 500 and the blue-chips reach new peaks this week, or next. Tech and the small-caps will need more momentum but are above their 50-day moving averages.

The second-quarter earnings is a month away and will more of a catalyst for a breakout for the major indexes, or a reason for a near-term top. Until then, the old adage is never to short a dull market so we will remain bullish until the VIX clears 20 or major support levels start to crack.

On that note, I’m expecting to have 1-2 new trades this week with the possibility of some of our current trades that are down giving us more premium to close at better levels.

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, $13.80, unchanged)

MRO July 12 calls (MRO210716C00012000, $2.05, unchanged)

Entry Price: $0.85 (5/24/2021)
Exit Target: $2.50 (closed 1/3 at $1.80 on 6/1/2021)
Return: 131%
Stop Target: $1.70 (Stop Limit)

Action: Friday’s high tapped $14.07 with key resistance at $14 holding for the third-straight session. A close above this level keeps upside towards $14.25-$14.50 in play. Support remains at $13.50-$13.25.

Western Union (WU, $25.03, down $0.09)

WU June 26 calls (WU210618C00026000, $0.10, down $0.05)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -85%
Stop Target: None

Action: Shares tested a low of $24.76 with upper support is at $24.75-$24.50 getting challenged but holding. Resistance at $25.25-$25.50 and the 50-day moving average. If shares can’t clear and hold the latter this week, or fall below $24.75, we will close the trade to save the remaining premium.

Intel (INTC, $57.37, up $1.13)

INTC June 60 calls (INTC210618C00060000, $0.25, up $0.05)

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

Action: Lower resistance at $57.50-$58 was breached but held on the run to $57.75. We are going to need a close above the latter this week to keep this position open as time decay will rapidly start coming into play. Support at $57-$56.50.

Utilities Select Sector SPDR Fund (XLU, $65.39, down $0.10)

XLU June 69 calls (XLU210618C00069000, $0.10, unchanged)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -85%
Stop Target: None

Action: Upper support at $65-$64.50 held on Friday’s fade to $65.31. Resistance is at $65.50-$66 and the 50-day moving average. If shares can’t clear $66.50 by the end of the week, we will likely exit the position to save any remaining premium.