MomentumOptions.com Pre-Market Update for 8/16/2021

Consumer Sentiment Surprises to the Downside

8:00am (EST)

The stock market was mostly higher on Friday after setting another round of record highs despite a sharp drop in consumer sentiment. Specifically, the preliminary consumer sentiment index for August fell to 70.2, its lowest level in a decade, versus forecasts to match the final reading of 81.2 for July.

The news suggested that the Delta variant of the coronavirus was impacting consumers as most of the weakness was in the expectations gauge which dropped 13.8 points to 65.2 after falling to 79 in July. Despite the worries, volatility continued to fade and is once again approaching a key level of support.

The S&P 500 closed on its session and fresh all-time peak at 4,468 (+0.2%). Unchartered territory and key resistance at 4,475 was challenged but held. A close above this level would likely indicate ongoing strength towards 4,500-4,525.

The Dow ended at 35,515 (+0.04%) after trading to an all-time high of 35,610. Key resistance at 35,500 was cleared and held. Continued closes above this level keeps upside momentum towards 35,750-36,000 in play.

The Nasdaq made an intraday run to 14,850 while settling at 14,822 (+0.04%). Key resistance at 14,900 held for the second-straight session. A close above this level and the record high at 14,896 from earlier this month would signal a trip towards 15,000-15,150.

The Russell 2000 was down for the second-straight session after tagging a late day low of 2,221 while finishing at 2,223 (-0.9%). Key support at 2,225 was breached and failed to hold. Continued closes below this level keeps a retest towards 2,200-2,175 in focus. Below is a chart of the IWM.

Market Movers

Shares of Beachbody (BODY) fell 6% after announcing quarterly results. The company reported a loss of five cents a share on revenue of $223 million versus expectations for a loss of eight cents on sales of $260 million.

Volatility Index

The Volatility Index (VIX) was down for the third-straight session with the low reaching 15.19. Near-term and upper support at 15.50-15 was recovered. A move below the latter would signal weakness towards 14.50-14 with the late June 52-week low at 14.10.

Lowered resistance is at 16-16.50 followed by 17-17.50 and the 50-day moving average.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was down for the second-straight session with the afternoon low reaching $95.92. Current and upper support at $96-$95.50 held on the close back below the 50-day moving average.

Resistance is at $96.50-$97 followed by $98-$98.50.

RSI (relative strength indicator) is back in a downtrend with key support at 50 holding. A close below this level would suggest additional weakness towards 45-40 and levels from late July. Resistance is at 55-60.

Sector

The Financial Select Sector Spider Fund (NYSE: XLF) had its six-session winning streak snapped following the pullback to $38.49. Fresh and upper support at $38.50-$38.25 was tripped but held. A close below the latter would indicate additional weakness towards $38-$37.75.

Resistance is at $38.75-$39 with Friday’s opening all-time peak reaching $38.95.

RSI has rolled over with upper support at 65-60 holding. A close below the latter would suggest additional downside towards 55-50. Key resistance is at 70.

Market Outlook

For the week, the Dow added 0.9%; the S&P 500 rose 0.7%; the Nasdaq dipped 0.1%; and the Russell 2000 fell 1.1%. The major indexes could continue their choppiness this week as Wall Street remains focused on the Federal Reserve’s Jackson Hole meeting at the end of the month.

That event, or the central bank’s next policy meeting in September, could offer signals on when the Fed might begin to unwind its $120 billion a month government bond buying program.

Earnings will remain in focus, especially in retail, with Home Depot (HD) and Walmart (WMT) reporting on Tuesday and Target (TGT) due to announce numbers on Wednesday.

Cisco Systems (CSCO) will also announce results after Wednesday’s closing bell. We recently booked a 23% win using call options and I have been looking for a reentry point to possibly get back into a trade with shares setting a fresh 52-week peak on Friday. However, there were some concerns in May that this quarter could be more challenging so we might wait until after the news to see where shares are at post earnings and a possible “sell-the-news” event.

There are a couple of other trades I like better so I could take action today or tomorrow with the portfolio relatively light. I also mentioned I don’t like the fact September options are expiring mid-month as this only gives us roughly 30 days with new positions. The grind higher could continue but I also want to make sure the Vix can clear and hold the 15 level this week.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 20-16 (56%). 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.

JetBlue Airways (JBLU, $15.35, down $0.25)

JBLU September 14 puts (JBLU210917P00014000, $0.32, up $0.02)

Entry Price: $0.40 (8/9/2021)
Exit Target: $0.80
Return: -20%
Stop Target: None

Action: Shares tapped a low of $15.30 with upper support at $15.25-$15 getting challenged but holding. Resistance is at $15.50-$15.75.

Juniper Networks (JNPR, $28.89, up $0.39)

JNPR September 30 calls (JNPR210917C00030000, $0.40, up $0.05)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -27%
Stop Target: None

Action: Friday’s peak reached of $28.91 with prior and lower resistance at $28.75-$29 getting cleared and holding. A close above the latter and the 52-week high at $29.10 would be a bullish signal for a run towards $30.50-$31. Rising support is at $28.50-$28.25.

Smith & Wesson Brands (SWBI, $24.08, down $0.53)

SWBI September 30 calls (SWBI210917C00030000, $0.45, down $0.10)

Entry Price: $0.85 (8/3/2021)
Exit Target: $1.70
Return: -47%
Stop Target: None

Action: Upper support at $24-$23.75 was breached but held on the fade to $23.79. Lowered resistance is at $24.25-$24.50.

International Game Tech (IGT, $19.78, down $0.34)

IGT August 22 calls (IGT210820C00022000, $0.10, down $0.05)

Entry Price: $0.70 (7/21/2021)
Exit Target: $1.40
Return: -86%
Stop Target: None

Action: Shares fell for the first time in seven sessions with the low hitting $19.63. Fresh and upper support at $19.75-$19.50 was breached but held. Resistance is at $20-$20.25.

These options expire this Friday and we are going to need a close back above $20.50 today to possibly keep this trade open. If not, we will likely close Tuesday morning to save the remaining premium.