MomentumOptions.com Pre-Market Update for 6/14/2021

Bulls Keep Momentum Despite Inflation Concerns

8:00am (EST)

The stock market edged higher on Friday despite another stronger-than-expected report on inflation. Specifically, the consumer price index jumped 5% in May, and the most since 2008. The gains in the major indexes gave the bulls their second-straight weekly win with the major indexes remaining within striking distance of fresh all-time highs.

The Russell 2000 was up for the first time in three sessions after ending on the session high of 2,335 (+1.1%). Prior and lower resistance at 2,325-2,350 was recovered. A close above the latter and the March record high at 2,360 would signal a run towards 2,375-2,400. Below is a chart of the IWM.

The Nasdaq closed on its session high of 14,069 (+0.4%). Fresh and lower resistance at 14,050-14,200 was cleared and held. A move above the latter and the late April all-time peak at 14,211 would suggest momentum towards 14,350-14,500.

The S&P 500 tagged a late day high 4,248 before settling at 4,247 (+0.2%). Key resistance at 4,250 was challenged but held. A close above this level and Thursday all-time top at 4,249 would indicate continued upside towards 4,275-4,300.

The Dow finished at 34,479 (+0.1%) with the high kissing 34,618. Key resistance at 34,500 was breached but held for the second-straight session. Continued closes above this level keeps 34,750-35,000 in play with the all-time high from early May at 35,091.

Market Movers

Shares of Callaway Golf (ELY) slipped 2% after tagging a low of $33.13 despite news it will be replacing GrubHub (GRUB) in the S&P MidCap 400.

Volatility Index

The Volatility Index (VIX) fell for the second-straight session after matching last Tuesday’s 52-week low of 15.15. Near-term and upper support at 15.50-15 was tripped but held. A close below the latter would indicate weakness towards 14-13.50.

Resistance is at 16.50-17 followed by 18-18.50 and the 50-day moving average.

Market Analysis

The S&P 400 Mid Cap Index (NYSE: MID) remains in a four-session trading range after closing on the session high of 2,752. Current and lower resistance at 2,750-2,775 was reclaimed. A close above the latter and the early May all-time peak at 2,780 would suggest a breakout towards 2,800-2,825.

Support is at 2,725-2,700 and the 50-day moving average.

RSI (relative strength index) is back in an uptrend with key resistance at 60 holding. A close above this level would signal ongoing strength towards 65-70. Support is at 55-50.

Sector

The Consumer Discretionary Select Spiders (NYSE: XLY) was up for the second-straight session with the intraday high hitting $173.23. Current and lower resistance at $173-$173.50 was cleared and held. A close above the latter would likely indicate a retest towards $174 and the 50-day moving average.

Support is at $172.50-$172 followed by $171-$170.50.

RSI is in an uptrend with lower resistance at 55-60 holding. A close above the latter would suggest strength towards 65-70 and levels from mid-April. Support is at 50-45.

Market Outlook

The major indexes went out near the session highs ahead of the weekend and this is typically a good signal for continued strength into Monday’s open. With record highs remaining in play, it will be important to see some follow through or the choppy action will likely continue.

Volatility hasn’t been below the 15 level since February 2020 and I have talked about this being a key development before all of the major indexes can breakout to fresh all-time highs. The Fed meeting midweek could be the catalyst that makes or breaks the bulls slight momentum this month.

I could have a new trade this morning in the iShares Silver Trust (SLV, $25.87, down $0.10). The SLV July 27.50 calls traded over 15,000 contracts on Friday and the SLV August 30 calls traded over 47,000 contracts. This is signaling traders are expecting new highs for silver over the near-term. If I take action, I will send out a Trade Alert.

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, $15.28, up $0.17)

F August 18 calls (F210820C00018000, $0.43, unchanged)

Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Return: -22%
Stop Target: None

Action: Shares snapped a five session slide with Friday’s peak reaching $15.43. Fresh and lower resistance at $15.25-$15.50 was cleared and held. Support is at $15-$14.75.

Tencent Music Entertainment Group (TME, $15.78, up $0.21)

TME July 17 calls (TME210716C00017000, $0.45, down $0.10)

Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Return: -25%
Stop Target: None

Action: Shares closed on the session low of $15.47. Near-term and upper support at $15.50-$15.25 failed to hold. Resistance is at $15.75-$16.