MomentumOptions.com Pre-Market Update for 9/7/2021

Jobs Report Disappoints

8:00am (EST)

The stock market was mostly lower on Friday after the August jobs report came in below expectations. Nonfarm payroll growth increased by just 235,000 versus forecasts of 720,000, and down from July’s revised print slightly north of one million.

The unemployment rate dipped to 5.2%, in line with estimates, but was a result of more people leaving the workforce. Wages were up 4.3% on a year-over-year basis with leisure and hospitality jobs flat for the month after leading the way throughout much of the year.

The Russell 2000 tagged a midday low of 2,286 while closing at 2,292 (-0.5%). Fresh and upper support at 2,300-2,275 failed to hold. A drop below the latter would indicate a backtest towards 2,250-2,225 and the 50-day moving average. Below is a chart of the IWM.

The Dow settled at 35,369 (-0.2%) after testing an intraday low of 35,269 to remain in a nine-session trading range. Current and upper support at 35,250-35,000 was challenged but held. A close below the latter below and the 50-day moving average would signal an ongoing fade towards 34,750-34,500.

The S&P 500 tapped a low of 4,521 while ending at 4,535 (-0.03%). Near-term and upper support at 4,525-4,500 was breached but held. A move below the latter would likely lead to additional weakness towards 4,475-4,450.

The Nasdaq traded a high of 15,375 before finishing at 15,363 (+0.2%). Key resistance at 15,400 was challenged but held for the second-straight session. A pop above this level would suggest strength towards 15,500-15,650.

Market Movers

Shares of Ooma (OOMA) jumped nearly 15% after announcing fourth-quarter numbers. The company reported a profit of 12 cents a shares on revenue of $44.3 million versus forecasts of 10 cents and $43.3 million, respectively.

The internet phone services company also gave guidance for a profit of 7-10 cents a share on revenue between $44-$44.8 million for the first quarter. Current estimates are for a profit of eight cents on sales of $43.2 million.

Volatility Index

The Volatility Index (VIX) was unchanged and remains in a five session trading range with Friday’s high hitting 17.06. Current and lower resistance at 17-17.50 was breached but held. A close above the latter and the 50-day moving average would indicate additional strength towards 18.50-19.

Support remains at 16-15.50.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (NYSE: DIA) is stuck in a 10-session trading range following the pullback to $353.09. Near-term and upper support at $353.50-$353 was breached but held. A close below the latter would signal further weakness towards $352-$351.50.

Resistance is at $354.50-$355 with the mid-August all-time peak at $356.60.

RSI is showing signs of rolling over with upper support at 55-50 holding. A move below the latter would suggest a further slide towards 45-40 and levels from mid-July. Resistance is at 60-65.

Sector

The Utilities Select Spider Fund (NYSE: XLU) was down for the first time in three sessions after trading down to $69.32. Upper support at $69.50-$69 failed to hold. A move below the latter would suggest a retest towards $68.50-$68.

Resistance is at $69.50-$70 with last Thursday’s all-time high at $70.07.

RSI is in a downtrend with key resistance at 60 holding. A drop below this level would suggest ongoing weakness towards 55-50 and levels from mid-July. Resistance is at 65-70.

Market Outlook

The action should start to pick up this week as Wall Street traders return from their summer long vacations. The second-quarter earnings season is basically in the books although there will be a number of key companies reporting numbers.

GameStop (GME), Affirm Holdings (AFRM) and Lululemon (LULU) will be in play but the heavy action won’t come back around until early October and when third-quarter numbers will be in focus.

There are a few economic reports that could sway the bulls or bears that include producer prices and wholesale inventories along with the release of the Federal Reserve Beige Book.

We closed three trades last week so the portfolio is somewhat light and I’m expecting to add 1-2 new positions this week. The win rate is at 55% for the year and down from my 13-year track record at 67%. With the action picking back up, I’m expecting more success and bigger winners now that the summer doldrums have passed.

I have mentioned September is typically a bearish month and October has historically seen some nasty corrections. However, I’m still more bullish than bearish as long as the VIX holds 20 this week.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 23-19 (55%). 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.

Agenus (AGEN, $6.09, down $0.08)

AGEN January 7 calls (AGEN220121C00007000, $1.00, down $0.05)

Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Return: -17%
Stop Target: None

Action: Shares tagged a low of $5.98 with upper support at $6-$5.75 getting breached but holding. Resistance is at $6.25-$6.50.

Financial Select Sector SPDR Fund (XLF, $38.07, down $0.24)

XLF October 40 calls (XLF211015C00040000, $0.22, down $0.03)

Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Return: -56%
Stop Target: None

Action: Friday’s low reached $37.98 with upper support at $38-$37.75 getting tripped but holding. Resistance is at $38.25-$38.50.

Juniper Networks (JNPR, $28.98, down $0.39)

JNPR September 30 calls (JNPR210917C00030000, $0.20, down $0.05)

Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Return: -64%
Stop Target: None

Action: Upper support at $29-$28.75 failed to hold on the close on the session low. Resistance at $29.25-$29.50.