Pre-Market Update for 9/12/2022

Bulls Get First Weekly Win in a Month

8:00am (EST)

The stock market snapped a three-week losing streak with Friday’s gains getting the 50-day moving averages back in focus. The up session ahead of a weekend was also a bullish signal that a near-term bottom could be forming and that money is coming back into the market.

The Nasdaq surged to an intraday high of 12,132 before settling at 12,112 (+2.1%). Prior and key resistance from late July at 12,000 and the 50-day moving average were recovered. Continued closes above these levels keeps upside towards 12,250-12,400 in play.

The Russell 2000 reclaimed its 50-day moving average after finishing at 1,882 (+2%) while reaching an afternoon high of 1,884. Early August and lower resistance at 1,875-1,900 was tripped and held. A move above the latter would suggest a further run to 1,925-1,950 and the 200-day moving average. Below is a chart of the IWM. 

The S&P 500 tagged a high of 4,076 while ending at 4,067 (+1.5%) and back above its 50-day moving average, as well. Late July and lower resistance at 4,075-4,100 was topped but held. A pop above the latter would indicate ongoing momentum towards 4,125-4,150.

The Dow closed at 32,151 (+1.2%) with the second half peak hitting 32,227. New and lower resistance at 32,000-32,250 was cleared and held. A close above the latter and the 50-day moving average would be a bullish development for upside towards 32,500-32,750.

Volatility Index

The Volatility Index (VIX) was down for the third-straight session after bottoming out at 22.64. Prior and upper support at 23-22.50 was breached and failed to hold. A fade below the latter sets up a retest towards 21.50-21.

Lowered resistance is at 23.50-24 and the 50-day moving average.

Market Analysis

The Wilshire 5000 Composite Index (WLSH) extended its winning streak to three-straight sessions slide after trading to a high of 40,797 while recovering the 50-day moving average. New and lower resistance at 40,750-41,000 was cleared but held. A close above the latter would suggest additional gains towards 41,250-41,500.

Support is at 40,250-40,000.

RSI (relative strength index) is in an uptrend with key resistance at 50 getting cleared and holding. Continued closes above this level would indicate strength to 55-60 and levels from the second half of last month. Support is at 45-40.


The Spiders S&P Homebuilders ETF (XHB) was also up for the third-straight day with the intraday high kissing $62.26. New and lower resistance at $62-$62.50 was cleared and held. A move above the latter would signal additional strength towards $63.50-$64.

Support is at $61.50-$61 and the 50-day moving average.

RSI cleared and held key resistance at 50. Continued closes above this level would suggest upside to 55-60 and mid-August levels. Support is at 45-40.

Market Outlook

At the start of the month, my downside targets were: Dow 31,250-31,000; S&P 3,925-3,900; Russell 1,800-1,775; and Nasdaq 11,500-11,350.

Tuesday and Wednesday’s lows: Dow 31,048-31,095; S&P 3,886-3,906; Russell 1,786-1,787; and Nasdaq 11,471-11,555. As you can see, these targets were incredibly accurate but they won’t mean anything if there isn’t continued momentum.

Remember, however, a close below the latter downside targets will likely get the mid-June 52-weeks lows back in focus.

The Volatility Index (VIX) was also a highlight of last week as the 28 level held on Tuesday’s and Wednesday’s market lows. I have sounded like a broken record on repeating this key level of resistance but it was, and still is important, as this will likely be the key signal that will let us know when fresh 52-week lows could be back in the picture.

The bulls also got the VIX back below 25 and the 200-day moving average on Thursday and followed that up on Friday after recovering the 50-day moving average.

As far as RSI levels, all of the major indexes danced near oversold conditions near 30 midweek. A closer look at the aforementioned charts show the Dow, S&P, Nasdaq, and the Russell bounced off this key level of RSI support in April, May and June.

The put options were becoming “extremely” expensive over the past couple of weeks following the pressure of another market meltdown and a double-digit rally off the mid-June 52-week lows. It is why we waited on the sidelines for a possible near-term bottom and one the charts likely confirmed last week.

September options are expiring this week and we only have one trade in play that we will be closing this morning. The regular October option expiration is on the 21st and just over five weeks away.

We did a weekly October trade on Friday but we may need longer for bullish setups that could occur during the third-quarter earnings season. Longer-term trades could also protect more of the premium in case the market stalls at current levels.

For these reasons, it might be best to go with November, December and even January 2023 options for new trades. With the Track Record at 24-14 and a 63% win rate, we want to finish the year strong while making sure we limit our risk going forward.

Momentum Options Play List

Closed Momentum Options Trades for 2022: 24-14 (63%). 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.

Intel (INTC, $31.46, up $0.71)

INTC (weekly) October 32 calls (INTC221007C00032000, $0.85, up $0.25)

Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: 6% 
Stop Target: None

Action: Friday’s peak reached $31.50 with new and lower resistance at $31.50-$31.75 getting tagged but holding. Support is at $31.25-$31.

The chart shows oversold conditions from last week pushed RSI below 30 with the 52-week low hitting $29.91 on Thursday. Catching a falling knife is always risky but I’m hoping a near-term bottom is in with a rebound towards $32-$34 possible.

This is why we went with the weekly calls that have nice volume and tight bid/ ask spreads which can be a problem when trading off-week options.

Rocket Companies (RKT, $8.04, up $0.36)

RKT December 8 calls (RKT221216C00008000, $1.05, up $0.17)

Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: 11% 
Stop Target: None

Action: Shares traded up to $8.17 with early July and lower resistance at $8-$8.25 getting cleared and holding. Rising support is at $7.75-$7.50.

The December option chain has three months before expiration and we only need a run towards $9, technically, to breakeven. A retest to $10 by then would get these calls to at least $2 in-the-money for an easy triple-digit winner.

Shares also reached oversold levels last week and why I wanted to get into RKT again. Our last trade in the name made a nice 71% in eight days.

Diana Shipping (DSX, $4.91, up $0.13)

DSX December 6 calls (DSX221216C00006000, $0.20, unchanged)

Entry Price: $0.40 (8/18/2022)
Exit Target: $1.00
Return: -50% 
Stop Target: None

Action: Prior and lower resistance from the beginning of the month at $4.90-$5 was recovered following the afternoon run to $4.94. A pop above the latter and the 50-day moving average would be a renewed bullish development. Support is at $4.80-$4.70.

ProShares Bitcoin Strategy ETF (BITO, $13.17, up $1.27)

BITO September 17 calls (BITO220916C00017000, $0.03, up $0.01)

Entry Price: $0.65 (8/11/2022)
Exit Target: $1.30
Return: -95% 
Stop Target: None

Action: Close the trade this morning so save the remaining premium.

We got into this position on the false breakout above $15 back in mid-August as there was a huge gap up to $17 to fill. There still is but multiple layers of resistance remain with these calls expiring this Friday.

Although this trade has been a bust, we can wait for a more definitive breakout the next time we see this setup.