MomentumOptions.com Pre-Market Update for 6/10/2021

Market Slips on Mixed Economic News

8:00am (EST)

The stock market struggled on Wednesday after trading on both sides of the ledger despite a drop in Treasury yields. Specifically, the benchmark 10-year yield fell below 1.5% as concerns over higher rates eased.

As far as economic news, wholesale inventories were up for the ninth-straight month following the 0.8% rise in April. Elsewhere, mortgage applications fell for the third-straight week with a decline of -3.1% as refinancing applications dropped -5.1%.

The Nasdaq closed at 13,911 (-0.1%) despite testing a midday high of 14,003. Key resistance at 14,000 was cleared but held. Continued closes above this level would suggest a run towards 14,100-14,250 with the late April all-time peak at 14,211.

The S&P 500 tapped an intraday high of 4,237 before ending at 4,219 (-0.2%). Key resistance at 4,235 was cleared but held for the second-straight session. A close above 4,240 and the lifetime high at 4,238 would indicate additional upside towards 4,275-4,300.

The Dow extended its losing streak to three-straight after tapping a late day low of 34,439 while settling at 34,447 (-0.4%). Current and upper support at 34,500-34,250 failed to hold. A move below the latter would signal a further backtest towards 34,000 and the 50-day moving average.

The Russell 2000 finished at 2,327 (-0.7%) with the final hour low hitting 2,325. Near-term and upper support at 2,350-2,325 failed to hold. A drop below the latter would be a slightly bearish development for additional weakness towards 2,300-2,275. Below is a chart of the IWM.

Market Movers

Shares of United Natural Foods (UNFI) tanked 15% despite reporting better-than-expected earnings. The company reported a profit of 94 cents a share versus estimates of 88 cents. However, revenue of $6.62 billion fell shy of forecasts for $6.8 billion.

Volatility Index

The Volatility Index (VIX) was up for the second-straight session with the intraday peak reaching 17.96. Current and lower resistance at 17.50-18 was cleared and held. A pop above the latter would indicate strength towards 18.50-19 and the 50-day moving average.

New support is at 17-16.50 followed by 15.50-15.

Market Analysis

The Wilshire 5000 Composite Index (NYSE: WLSH) traded to an all-time high of 44,513 before ending lower. Unchartered territory and key resistance at 44,500 was cleared but held. Continued closes above this level would suggest momemtum towards 44,750-45,000.

Support is at 44,250-44,000.

RSI (relative strength index) is showing signs of rolling over with key support at 60 failing to hold. Continued closes below this level would suggest weakness towards 55-50. Resistance is at 65-70 and the mid-April highs.

Sector

The Consumer Staples Select SPDR Fund (NYSE: XLP) was down for the third-straight session with the late session low kissing $70.44. Fresh and upper support at $70.50-$70 failed to hold. A close below the latter and the 50-day moving average would signal additional weakness towards $69-$68.50.

Resistance is at $71-$71.50 with last Friday’s all-time peak at $71.69.

RSI is in a downtrend with key support at 50 failing to hold. Continued closes below this level would suggest downside pressure towards 45-40. Resistance is at 55-60.

Market Outlook

The S&P 500 came within a point of setting a fresh all-time high yesterday and the Nasdaq’s pop above 14,000 is still signaling higher highs despite the sloppy closes. The 50-day moving average on the VIX remains in a downtrend and I think it will hold into next week. However, as I have been mentioning, a close back above the 20 level would be a bearish development and also signal a near-term top for the market.

I opened two new trades yesterday because I always like to have a least one open position at all times but the market choppiness could remain throughout this month and into earnings season after the 4th of July. Both trades only cost $1.15 in premium so there isn’t much risk on the table.

In trending markets, I can have up to 5-7 open positions so I’m still being slightly cautious until a major breakout, or breakdown occurs.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 18-9 (67%). 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.

Ford Motor (F, $15.48, down $0.15)

F August 18 calls (F210820C00018000, $0.55, down $0.10)

Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Return: 0%
Stop Target: None

Action: Ford extended its losing streak to four-straight sessions with Wednesday’s low reaching $15.39. Current and upper support at $15.50-$15.25 failed to hold. Resistance is at $15.75-$16.

There is backtest potential to $15-$14.50 if $15.25 fails to hold and why I went with the August calls. The company will announce earnings in late July and I expect another blowout quarter. This should be the catalyst to get shares toward the $20 level.

Tencent Music Entertainment Group (TME, $15.57, up $0.28)

TME July 17 calls (TME210716C00017000, $0.60, up $0.20)

Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Return: 0%
Stop Target: None

Action: Yesterday’s peak reached $16.08 with prior and lower resistance at $16-$16.25 getting cleared but holding. Rising support is at $15.25-$15.

I went with the July calls because I’m expecting a quick test towards $17-$17.25 over the near-term. Shares remains slightly oversold with RSI just above 40.