MomentumOptions.com Pre-Market Update for 9/8/2021
Market Mostly Lower as Volatility Rises
The stock market was mostly lower to start the shortened week as Wall Street monitors the end of pandemic-era jobless benefits and its impact on the labor market. Tech outperformed but was choppy throughout the session after trading on both sides of the ledger.
Industrials and Utilities were the weakest sectors after falling 1.7% and 1.3%, respectively. Meanwhile, volatility picked up after trading to a fresh monthly high while closing back above a key level of resistance.
The Nasdaq closed at 15,374 (+0.1%) after tapping an all-time high of 15,403. Key resistance at 15,400 was cleared for the first time but held. Continued closes above this level would signal ongoing strength towards 15,500-15,650.
The Dow tested an intraday low of 35,060 before ending at 35,100 (-0.8%). Upper support at 35,250-35,000 was breached and failed to hold. A drop below the latter below and the 50-day moving average would be a bearish development with weakness towards 34,750-34,500.
The Russell 2000 settled at 2,275 (-0.7%) and the session low. Prior and upper support at 2,275-2,250 was kissed but held. A move below the latter would suggest additional towards 2,225-2,200 and the 50-day moving average. Below is a chart of the IWM.
The S&P 500 finished at 4,520 (-0.3%) after tagging a morning low of 4,513. Current and upper support at 4,525-4,500 failed to hold. A close below the latter would indicate a further fade towards 4,475-4,450.
Shares of Match Group (MTCH) rose 7% after it was announced the company will replace Perrigo (PRGO) in the S&P 500. The changes will be effective prior to the open of trading on Monday, September 20th to coincide with the quarterly rebalance.
The Volatility Index (VIX) showed continued strength with Tuesday’s peak reaching 18.39. Prior and lower resistance at 18-18.50 was cleared and held on the close back above the 50-day moving average A move above the latter reopens upside risk towards 19.50-20 and the 200-day moving average.
Fresh support is at 17.50-17.
The SPDR S&P 500 ETF (NYSE: SPY) remains in a six-session trading with the low hitting $450.74. Near-term and upper support at $451-$450.50 was tripped but held. A close below the latter would indicate additional weakness towards $449.50-$449.
Resistance is at $452.50-$453 with last Thursday’s all-time peak at $454.05.
RSI (relative strength index) is back in a downtrend with upper support at 65-60 failing to hold. A close below the latter would signal further weakness towards 55-50 and levels from mid-August. Key resistance is at 70 and a level that has been holding since late April.
The Industrials Select Sector SPDR Fund (NYSE: XLI) was down for the second-straight session after plunging to a low of $102.71. Prior and upper support at $103-$102.50 failed to hold. A close below the latter would suggest a further slide towards $101-$100.50.
New resistance is at $103-$103.50 and the 50-day moving average.
RSI is in a downtrend with key resistance at 45 failing to hold. Continued closes below this level would likely lead to a pullback towards 40-35 and levels from mid-July. Resistance is at 50-55.
The market action from Tuesday was bearish with volatility closing back above the 50-day moving average. There is a good chance another pop towards 20 comes back into play, and from there, we will have to see if the bears can clear and hold this level for more than a day or two.
The VIX closed at 21.57 and 21.67 in August in back-to-back sessions and there has only been two other previous closes above this level since late May. The VIX closed at 22.50 on July 19th and 20.70 on June 18th.
In all of these occurrences, a retest towards 15 followed afterwards and has kept the yearlong rally intact. While a number of talking heads have predicted a 5%-10% selloff for months, it just hasn’t happened. In fact, the last time the S&P 500 fell 5% was in October 2020.
We were able to close a couple of put option trades for roughly 30% wins in late August when the VIX popped past 20 but the trades were up nearly 100% before the bulls battled back.
There is a good chance we take a couple of put trades, possibly as early as today, put we need to be nimble if the bulls hold key support levels this week. I have mentioned September is typically a weak month for stocks and option expiration week is typically bearish. This will occur next week with the regular September options expiring next Friday, so the bears could do some near-term damage on continued weakness.
If I take action, I will send out a trade alert at some point today, as I have a couple of stocks that are in bearish setups that I like for short-term momentum to the downside.
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, $6.40, up $0.31)
AGEN January 7 calls (AGEN220121C00007000, $1.10, up $0.10)
Entry Price: $1.20 (8/26/2021)
Exit Target: $2.40
Stop Target: None
Action: Tuesday’s peak reached $6.41 with prior and lower resistance at $6.50-$6.75 getting challenged but holding. Support at $6.25-$6.
Financial Select Sector SPDR Fund (XLF, $37.84, down $0.23)
XLF October 40 calls (XLF211015C00040000, $0.17, down $0.05)
Entry Price: $0.50 (8/25/2021)
Exit Target: $1.00
Stop Target: None
Action: Shares tapped a low of $37.84 with upper support at $38-$37.75 failing to hold. Resistance is at $38.25-$38.50.
Juniper Networks (JNPR, $28.29, down $0.69)
JNPR September 30 calls (JNPR210917C00030000, $0.10, down $0.10)
Entry Price: $0.55 (8/3/2021)
Exit Target: $1.10
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
With these options expiring in less than two weeks, yesterday’s action has forced us out of the trade. The inability for shares to clear and hold key resistance at $29.50 last week was frustrating as a run past $30 could have come quickly. However, we will keep shares on the watch list for a possible reentry point down the road.