MomentumOptions.com Pre-Market Update for 9/14/2022
Inflation Fears Return
8:00am (EST)
The stock market tumbled on Tuesday with the major indexes suffering their worst day in over two years following the latest update on inflation. Specifically, the Consumer Price Index for August revealed prices rose 8.3% over the prior year and 0.1% from the prior month.
Wall Street was expecting an 8.1% increase in inflation over last year and a decline of 0.1% from the prior month. The losses pushed the major indexes back below their 50-day moving averages while volatility spiked to its highest level since mid-July.
The Nasdaq tagged an afternoon low of 11,604 before settling at 11,633 (-5.2%). Prior and upper support at 11,650-11,500 failed to hold. A drop below the latter would be a renewed bearish setup with downside risk to 11,400-11,250.
The S&P 500 closed at 3,932 (-4.3%) after bottoming out at 3,921. Near-term and upper support at 3,925-3,900 was breached but held. A move below the latter would suggest downside pressure towards 3,875-3,850.
The Dow ended at 31,104 (-3.9%) with the low hitting 31,018. Key support at 31,000 was challenged but held. A fade below the latter would indicate a further slide to 30,750-30,500.
The Russell 2000 tested a low of 1,825 (-3.9%) before going out at 1,831. Current and upper support at 1,825-1,800 was kissed but held. A close below the latter would signal additional weakness towards 1,775-1,750. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) was up for the second-straight session with the high reaching 28.15. Key resistance at 28 was cleared but held. A close above this level would be a very bearish development for the market with further upside risk to 29.50-30.
New support is at 26.50-26 followed by 25.50-25 and the 200-day moving average.
Market Analysis
The S&P 400 Mid Cap Index (MID) had its four-session winning streak snapped following the pullback to 2,422. Prior and upper support from late August at 2,425-2,400 was tripped but held. A close below the latter reopens downside risk towards 2,375-2,350.
Resistance is at 2,450-2,475 and the 50-day moving average.
RSI (relative strength index) is back in a downtrend with upper support at 45-40 failing to hold. A close below the latter would indicate further weakness towards 35-30 and levels from mid-June and earlier this month. Resistance is at 50-55.
Sector
The Spider S&P Retail ETF (XRT) was down for the first time in three sessions with the low hitting $63.01. Near-term and upper support at $63.50-$63 failed to hold. A drop below the latter would indicate a further slide towards $62-$61.50.
Resistance is at $64.50-$65 and the 50-day moving average.
RSI rolled over with upper support at 45-40 failing to hold. A drop below the latter would suggest a further slide towards 35-30 and the lows from May. Resistance is at 50-55.
Market Outlook
Yesterday’s selloff has once again put the major indexes at risk for a possible retest towards the July lows and June’s 52-week lows. Key support levels to watch going forward are: Dow 31,000; S&P 3,900, Nasdaq 11,500; and Russell 1,775. A close below these levels could lead to another round of panic selling.
As far as volatility, the 28 level held, and key resistance from late August and earlier this month. Of course, I have highlighted this area repeatedly over the last few weeks in anticipation of the next leg lower for the major indexes.
With that said, all we can do is watch and wait to see if all of the aforementioned levels hold into today’s close. If they don’t, we could add a few bearish trades to the portfolio at some point this week.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-15 (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.
Intel (INTC, $29.29, down $2.27)
INTC (weekly) October 32 calls (INTC221007C00032000, $0.30, down $0.60)
Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -63%
Stop Target: None
Action: Shares plunged to a fresh 52-week low of $29.25 with new and upper support at $29.25-$29 getting kissed and holding. Lowered resistance is at $29.50-$29.75.
Rocket Companies (RKT, $7.73, down $0.36)
RKT December 8 calls (RKT221216C00008000, $0.85, down $0.20)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -11%
Stop Target: None
Action: Tuesday’s low reached $7.41 with near-term and upper support at $7.50-$7.25 getting tripped but holding. Resistance is at $8-$8.25.
Diana Shipping (DSX, $5.05, up $0.08)
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 late July at $5-$5.10 was recovered following the run to the latter. Support is at $4.90-$4.80.
