MomentumOptions.com Pre-Market Update for 6/11/2021
S&P 500 Hits Fresh All-Time High
The stock market closed mostly higher on Thursday despite economic news that showed the consumer price index in May had its biggest year-over-year jump in 13 years. A silver lining in the report revealed that much of the price increases were in commodities and airfares, and is therefore likely to be temporary.
The Nasdaq closed at 14,020 (+0.8%) with the opening high hitting 14,031. Key resistance at 14,000 was reclaimed. Continued closes above this level keeps upside towards 14,100-14,250 in play with the late April all-time peak at 14,211.
The S&P 500 made a morning run to 4,249, a new record high, before ending at 4,239 (+0.5%). Fresh and lower resistance at 4,225-4,250 was cleared and held. A pop above the latter would be an ongoing bullish development with breakout potential towards 4,275-4,300.
The Dow settled at 34,466 (+0.1%) after tagging an intraday high of 34,737. Lower resistance at 34,500-34,750 was breached but held. A close above the latter would suggest a retest towards the 35,000 level with the lifetime high from early May at 35,091.
The Russell 2000 was down for the second-straight session after trading to a midday low of 2,305 while finishing at 2,311 (-0.7%). Key support at 2,300 was challenged but held. A move below this level would indicate additional weakness towards 2,275-2,250. Below is a chart of the IWM.
Shares of Restoration Hardware (RH) jumped 15% following another blowout quarter. The company reported a profit of $4.89 on revenue north of $860 million. Forecasts were for earnings of $4.10 on sales of $757 million. RH also raised its 2021 revenue growth outlook to 25%-30% from 15%-20%.
The Volatility Index (VIX) was down for the first time in four sessions with the intraday low tapping 16.01. Current and upper support at 16.50-16 was recovered. A close below the latter would suggest another fade towards 15.50-15 with Tuesday’s 52-week low at 15.15.
Resistance is at 17-17.50 followed by 18-18.50 and the 50-day moving average.
The Invesco QQQ Trust (Nasdaq: QQQ) extended its winning streak to five-straight sessions with the high reaching $340.46. Prior and lower resistance from late May at $340-$340.50 was cleared and held. A close above the latter level would indicate additional strength towards $342-$342.50 with the late April all-time peak at $342.80.
Support is at $337-$336.50 followed by $333-$332.50 and the 50-day moving average.
RSI (relative strength indicator) is in an uptrend with lower resistance at 65-70 holding. A close above the latter would suggest additional strength towards 75-80 and overbought levels from September 2020. Key support is at 60.
The Dow Jones Transportation Average (NYSE: TRAN) was down for the second-straight session and for the sixth time in seven after testing a low of 15,165. Prior and upper support from late April at 15,250-15,100 was breached and failed to hold. A close below the latter would likely lead towards a further fade towards 15,000-14,850.
Resistance is at 15,300-15,450 and the 50-day moving average.
RSI is in a downtrend with key support at 40 holding. A close below this level would signal weakness towards 35 and the late January low. Resistance is at 45-50.
Although the S&P 500 made a fresh all-time high, there still seems to be a few troublesome spots in the market. The weakness in the Transports and the small-caps are a disappointment along with the VIX failing to clear and close below the 15 level.
While inflation seems to be a top worry, fear seems to have subsided for the time being. I have talked about the upcoming second-quarter earnings season being a catalyst for an overall market breakout, or a failure of key resistance levels.
This cycle is still three to four weeks away so I’m expecting the back-and-fourth action to continue until early July. We will continue to look for “cheap” option trades until major momentum is back in play.
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, $15.11, down $0.37)
F August 18 calls (F210820C00018000, $0.43, down $0.12)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Shares were down for the fifth-straight session following Thursday’s pullback to $15.08. Near-term and upper support at $15.25-$15 failed to hold. Resistance is at $15.50-$15.75.
Tencent Music Entertainment Group (TME, $15.78, up $0.21)
TME July 17 calls (TME210716C00017000, $0.60, unchanged)
Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Stop Target: None
Action: Yesterday’s high reached $15.98 with current and lower resistance at $15.75-$16 getting cleared and holding. Rising support is at $15.50-$15.25.