MomentumOptions.com Pre-Market Update for 6/17/2021

Fed Minutes Induce Selling Pressure

8:00am (EST)

The stock market was weak throughout much of Wednesday’s action following the release of the Fed minutes and comments from Chairman Powell. The Federal Reserve held interest rates near-zero but a number of Fed officials indicated rate hikes by the end of 2023.

Specifically, the central bank’s optimism over the economic outlook showed 13 of the FOMC’s 18 members projected at least one rate hike by the end of 2023. The major indexes rebounded off the session lows after Powell said discussing rate hikes were highly premature and that individual forecasts are not a great forecaster of future rate hikes.

The Russell 2000 ended at 2,314 (-0.2%) to extend its losing streak to three-straight with the session low kissing 2,296. Key support at 2,300 was tripped but held. A close below this level would signal a retest towards 2,275-2,250. Below is a chart of the IWM.

The Nasdaq closed at 14,039 (-0.2%) with the second-half low reaching 13,903. Current and upper support at 14,000-13,850 was breached but held. A move below the latter would suggest a further fade towards 13,750-13,600 and the 50-day moving average.

The S&P 500 tagged a late day high 4,202 before settling at 4,223 (-0.5%). Fresh and upper support at 4,225-4,200 failed to hold. A close below the latter would indicate continued weakness towards 4,175-4,150 and the 50-day moving average.

The Dow finished at 34,033 (-0.8%) with the afternoon low tapping 33,917. Key support at 34,000 was breached but held on the close back below the 50-day moving average. A close below this level would signal a further backtest towards 33,750-33,500 and levels from mid-May.

Market Movers

Shares of Blue Apron (APRN) sank 21% following a 4.75 million spot secondary offering priced at $4.25. The company recently lowered its second-quarter revenue numbers to $122-$126 million, with a net loss of $17 million, versus forecasts for $141 million in sales.

Volatility Index

The Volatility Index (VIX) extended its winning streak to three-straight sessions following the spike to 19.11. Prior and lower resistance at 19-19.50 and the 50-day moving average were breached but levels that held. A close above 20 would be a bearish development for the market.

Rising support is at 17-16.50.

Market Analysis

The SPDR S&P 500 ETF (NYSE: SPY) pulled back for the second-straight day with the intraday low hitting $419.92. Current and upper support at $420-$419.50 was triggered but held. A drop below the latter would suggest additional weakness towards $417-$416.50 and the 50-day moving average.

Resistance is at $424.50-$425 with Tuesday’s all-time high at $425.46.

RSI (relative strength index) is in a downtrend with upper support at 55-50 holding. A move below this level would signal further weakness towards 45-40 and levels from early May. Resistance is at 60.

Sector

The iShares PHLX Semiconductor ETF (Nasdaq: SOXX) was also down for the second-straight session following the intraday fade to $430.60. Prior and upper support at $431-$430.50 was breached but held. A close below the latter would signal further risk towards $426-$425.50 and the 50-day moving average.

Resistance is at $435-$435.50 followed by $439.50-$440.

RSI is back in a downtrend with upper support at 55-50 holding. A close below the latter would suggest additional weakness towards 45-40 and levels from mid-May. Key resistance is at 60.

Market Outlook

I mentioned coming into the month the Fed meeting would be a key event to see if the bulls could hold momentum or if the choppiness would continue. Excluding the Dow, the major indexes are still up for the month but volatility is once again becoming elevated. This week’s weakness is confirming the summer doldrums and why I haven’t recommended a lot of new positions.

On that note, I have been adding possible bearish trades to my Watch List as we could be setting up for a June swoon if volatility closes above the 20 level. If so, we can make some decent returns in a short period of time.

I also mentioned if the VIX failed to close below the 15 level, the major indexes would have trouble making new all-time highs. Monday’s 52-week low hit 15.04. While the S&P 500 has made fresh record highs, the other major indexes have struggled at key resistance levels.

It is possible the VIX trades between 15-20 into 2Q earnings season which will start in early July. There are just 10 more trading days left for the month of June and I do expect a clearer trend will emerge beginning next month. Until then, I know it can be frustrating waiting for a breakout, or breakdown, but we just need to be patient.

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, $15.02, up $0.02)

F August 18 calls (F210820C00018000, $0.35, unchanged)

Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Return: -36%
Stop Target: None

Action: Wednesday’s high touched $15.29 with prior and lower resistance at $15.25-$15.50 getting tripped and holding. Support remains at $14.75-$14.50.

Tencent Music Entertainment Group (TME, $15.35, down $0.11)

TME July 17 calls (TME210716C00017000, $0.32, down $0.05)

Entry Price: $0.60 (6/9/2021)
Exit Target: $1.20
Return: -47%
Stop Target: None

Action: Shares tagged a low of $15.14 with prior and upper support at $15.25-$15.50 getting breached but holding. Resistance is at $15.50-$15.75.