MomentumOptions.com Pre-Market Update for 7/6/2021
Jobs Reports Fuels Continued Momentum
The stock market was mostly higher on Friday following the June jobs report with another round of record highs for Tech and the broader market. Specifically, non-farm payrolls rose by 850,000, the sixth-straight monthly gain, versus forecasts for a print of 720,000. The unemployment rate, however, unexpectedly ticked up to 5.9% versus expectations for a dip to 5.6%.
The small-caps failed to show continued strength but volatility eased for the third-straight session. Technology and Healthcare were the strongest sectors while Energy and Financials were slightly weak.
The Nasdaq traded to a fresh all-time high of 14,649 before ending at 14,639 (+0.8%). Unchartered territory and lower resistance at 14,600-14,750 was cleared and held. A move above the latter would indicate ongoing momentum towards 14,850-15,000.
The S&P 500 was up for the seventh-straight session after settling at 4,352 (+0.8%) with the record peak hitting 4,355. Fresh and lower resistance at 4,350-4,375 was breached and held. A close above the latter would signal additional upside towards 4,400-4,425.
The Dow ended at 34,786 (+0.4%) following the intraday run to 34,821. Key resistance at 34,750 was recovered. Continued closes above this level would suggest a retest towards 35,000 with the lifetime top from early May at 35,091.
The Russell 2000 went out at 2,305 (-1%) with the midday low tapping 2,302. Current and upper support at 2,325-2,300 failed to hold. A drop below the latter would likely lead to a continued fade towards 2,275-2,250. Below is a chart of the IWM.
Shares of Lordstown Motors fell nearly 11% following news the Department of Justice is probing the company. Lordstown has previously stated the Securities and Exchange Commission has issued subpoenas regarding the company’s move last year to become a public company and its representations about pre-sale orders.
The Volatility Index (VIX) fell for the third-straight session with the morning low tagging 14.25. Current and upper support at 14.50-14 was tripped but held. A close below the latter and last Tuesday’s 52-week low at 14.10 would suggest further weakness towards 13.50-13.
Lowered resistance is at 15.50-16 followed by 17-17.50.
The S&P 400 Mid Cap Index (NYSE: MID) traded in a 20-point range with the session low reaching 2,701 and close back below the 50-day moving average. Current and upper support at 2,700-2,675 was challenged but held. A drop below the latter would suggest a retest towards 2,650-2,625.
Resistance is at 2,725-2,750.
RSI (relative strength index) is back in a downtrend with key support at 50 holding. A move below this level would signal weakness towards 45-40. Resistance is at 55-60 with the latter holding since late May.
The SPDR Gold Shares (NYSE: GLD) was up for the third-straight session with the high tapping $167.71. Near-term and lower resistance at $167.50-$168 was cleared but held. A close above the latter would would be a bullish signal for a run towards $169.50-$170.
Rising support is at $166.50-$166.
RSI is back in an uptrend with key resistance at 40 getting recovered. Continued closes above this level would signal strength towards 45-50. Support is at 35-30.
July is often bullish for the market and typically represents the best month of the third-quarter as the start of the second half brings an inflow of retirement funds. However, it is also, historically, the start of the Nasdaq’s worst four months of the year.
Given the strong performance in June and into last week, the Nasdaq and the S&P 500 are now approaching slightly overbought levels with RSI above 70 on both indexes. While this doesn’t mean higher record highs can’t be reached, it is something to watch over the next week or two.
The start of the second quarter earnings season will officially begin next week with the Financial sector kicking things off. I have talked about this being the main catalyst that will support current valuations for stocks, or if it will be the beginning of a pullback.
I mentioned the current momentum possibly carrying the Nasdaq towards the 15,000 level and this is just over 2% away from occurring. Friday’s breakout was a good sign it could come sooner rather than latter and would also represent a good opportunity for some profit taking.
With that being said, volatility will likely give us the best clue of a possible market top as the VIX continues to struggle with closing below 15. This level has been breached, but not held, in four of the last eight trading sessions. In fact, the last close below 15 occurred in February 2020. If cleared and held, it would confirm higher market highs. On the flip side, a close above 17-17.50 would be a slight warning sign for a pause in momentum.
Momentum Options Play List
Closed Momentum Options Trades for 2021: 18-11 (62%). 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.
Himax Technologies (HIMX, $14.74, down $1.17)
HIMX August 20 calls (HIMX210820C00020000, $0.35, down $0.35)
Entry Price: $1.00 (6/30/2021)
Exit Target: $2.00
Stop Target: None
Action: Friday’s fade hit $14.48 with prior and upper support at $14.50-$14.25 getting breached but holding. Lowered resistance is at $15-$15.25.
I was looking for shares to clear key resistance from February just above $17 when we got into this trade. Although the pullback has been disappointing, shares are capable of big moves with a run past $20 likely coming on a breakout.
Canoo (GOEV, $9.08, down $0.39)
GOEV August 10 calls (GOEV210820C00010000, $0.80, down $0.20)
Entry Price: $1.10 (6/30/2021)
Exit Target: $2.20
Stop Target: None
Action: Shares tested a low $9.04 with upper support at $9.25-$9 failing to hold. Resistance is at $9.50-$9.75.
Marathon Oil (MRO, $13.85, down $0.32)
MRO August 15 calls (MRO210820C00015000, $0.60, down $0.15)
Entry Price: $0.70 (6/25/2021)
Exit Target: $1.40
Stop Target: None
Action: Friday’s pullback to $13.82 failed to hold fresh and upper support at $14-$13.75. Resistance is at $14.25-$14.50 with Thursday 52-week peak at $14.33.
Ford Motor (F, $14.93, up $0.02)
F August 18 calls (F210820C00018000, $0.20, unchanged)
Entry Price: $0.55 (6/9/2021)
Exit Target: $1.10
Stop Target: None
Action: Key resistance at $15 was cleared but held with Friday’s high reaching $15.04. Support remains at $14.75-$14.50.
The company stated retail sales were up 10.7% through June of this year with retail orders up 16-fold over last year. Reservations for the F-150 Lightning have now zoomed past 100,000 with electric vehicles sales hitting a record 56,570 for the first half of 2021.