Pre-Market Update for 9/16/2022

Key Support Levels Back in Focus

8:00am (EST)

The stock market showed strength throughout the first half of Thursday following a flurry of economic news that was mostly better-than-expected. Afternoon weakness spoiled the party with the blue-chips making another monthly low while failing to hold key support.

The Nasdaq tagged an intraday low 11,497 while finishing at 11,552 (-1.4%). Key support at 11,500 was tripped but held. A close below this level would indicate a further slide towards 11,400-11,250.

The S&P 500 settled at 3,901 (-1.1%) with the afternoon low kissing 3,888. Crucial support at 3,900 was breached but held by a point. A close below this level and the monthly low at 3,886 reopens downside action to 3,875-3,850.

The Russell 2000 bottomed out at 1,818 while going out at 1,825 (-0.7%). Near-term and upper support at 1,825-1,800 was breached but held by a quarter-point. A drop below the latter would suggest additional weakness towards 1,775-1,750. Below is a chart of the IWM. 

The Dow ended at 30,961 (-0.6%) after trading to a low of 30,882. Key support at 31,000 failed to hold. Continued closes below this level would be a bearish development for a further fade to 30,750-30,500.

Volatility Index

The Volatility Index (VIX) was slightly up after pushing a low of 25.42. Upper support at 25.50-25 was cracked but held. A move below the latter and the 200-day moving average would signal a retest towards 24-23.50 and the 50-day moving average.

Lowered resistance is at 27-27.50.

Market Analysis

The Spiders Dow Jones Industrial Average ETF (DIA) traded in another tight range with the low at $309.54. Key support at $310 was tripped but held. A close below this level would indicate additional selling pressure down to $307.50-$307.

Resistance remains at $313-$313.50.

RSI is back in a slight downtrend with key support at 35 holding. A move below this level would indicate downside action towards 30 and the June low. Resistance is at 40-45.

Sector

The Communication Services (XLC) was down for the second time in three sessions after touching a low of $52.49. Current and upper support at $52.50-$52 was violated but held. A fade below the latter would signal ongoing weakness to $51.50-$51.

Resistance is at $53.50-$54.

RSI is showing signs of rolling over with key support at 35 holding. Continued closes below this level would indicate additional weakness towards 30 and the low from mid-June. Resistance is at 40.

Market Outlook

Once again, the bulls face another crucial session with key support levels back in the mix. With the Dow closing below 31,000, it will be imperative for the S&P to hold 3,900 ahead of the weekend and the Nasdaq 11,500. These levels for the latter two were breached but held on Thursday with all three now in “stretch” territory.

The Russell easily held 1,775 so this remains the one positive situation for the bulls. The higher lows on market weakness for the volatility index, and the fact the VIX continues to hold key resistance at 28, are also positive. However, it just feels like the bulls are walking on eggshells.

Another lower Friday and Monday close this week to match last week would be an arrow in favor of the bears and would confirm money is coming out of the market. It would also continue to confirm fresh 52-week lows for the major indexes are a higher probability.

Options Play List

Intel (INTC, $28.84, down $0.34)

INTC (weekly) October 32 calls (INTC221007C00032000, $0.16, down $0.04)

Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -80% 
Stop Target: None

Action: Shares remain in oversold territory with yesterday’s fresh 52-week low hitting $28.71. New and upper support at $28.75-$28.50 was breached but held. Lowered resistance is at $29-$29.25.

Let’s see how Monday goes before possibly bailing on this position. These calls still have three weeks before they expire.

Rocket Companies (RKT, $7.51, down $0.02)

RKT December 8 calls (RKT221216C00008000, $0.75, unchanged)

Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -22% 
Stop Target: None

Action: Shares traded down to $7.43 with current and upper support at $7.50-$7.25 getting breached but holding for the third-straight session. Resistance remains at $7.75-$8.

Diana Shipping (DSX, $4.95, unchanged)

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: Upper support at $4.90-$4.80 was tripped but held with the intraday low tagging $4.88. Resistance is at $5-$5.10 and the 50-day moving average.