MomentumOptions.com Pre-Market Update for 9/19/2022
Bears Push Fresh Monthly Lows
8:00am (EST)
Wall Street fell for the second-straight session to end a lousy week for the bulls as the bears pushed fresh monthly lows while cracking key support levels. The major indexes cut some of the losses into the closing bell after suffering their worst week since June but the technical damage is pointing towards a retest of the July and June 52-week lows.
The Russell 2000 traded down to 1,778 while ending at 1,798 (-1.5%). Key support at 1,775 was challenged but held. A close below this level would be a bearish development with further downside risk towards 1,750-1,725 and levels from mid-July. Below is a chart of the IWM.
The Nasdaq settled at 11,448 (-0.9%) with the intraday low tapping 11,316. Prior and upper support from the back half of July at 11,400-11,250 was breached but held. A move below the latter would indicate ongoing weakness to 11,150-11,000.
The S&P 500 tagged a midday low of 3,837 before closing at 3,873 (-0.7%). Upper support from late July at 3,850-3,825 was tripped but held. A fade below the latter would suggest a further slide towards 3,800-3,775.
The Dow finished at 30,822 (-0.5%) after kissing an afternoon low of 30,550. Upper support at 30,750-30,500 was triggered but held. A drop below the latter would signal a further backtest to 30,250-30,000.
Volatility Index
The Volatility Index (VIX) was up for the second-straight day with the peak reaching 28.45. Key resistance at 28 was cleared but held. A close above this level would be a very bearish development for the market with upside towards 30-30.50.
Rising support is at 26-25.50 with a close back below 25 and the 200-day moving average signaling some near-term relief for the major indexes.
Market Analysis
The SPDR S&P 500 ETF (SPY) was down for the second-straight session after testing an intraday low of $382.11. Mid-July and upper support at $382.50-$382 was tripped but held. A fall below the latter would suggest additional weakness towards $380.50-$380.
Resistance is at $386-$386.50.
RSI (relative strength index) is in a downtrend with key support at 35 holding. A close below this level would signal further downside action towards 30 and the May and June low. Resistance is at 40-45.
Sector
The Utilities Select Spider (XLU) fell for the third time in four sessions following the afternoon fade to $74.34. Prior and upper support from the start of the month at $74.50-$74 failed to hold. A close below the latter and the 50-day moving average would suggest a retest to $72.50-$72.
Resistance is at $75-$75.50.
RSI is showing signs of rolling over with key support at 45 failing to hold. A close below this level would signal weakness towards 40 and the July low. Resistance is at 50.
Market Outlook
For the week, the Nasdaq sank 5.5% while the S&P tanked 4.8%. The Russell tumbled 4.5% and the Dow dropped 4.1%. More importantly, the major indexes failed to hold key support levels from the start of the month: Dow 31,000; S&P 3,900, Nasdaq 11,500;
The Russell did hold 1,775 but by an impressive three points. I have warned a close below these levels for the major indexes could lead to another round of panic selling.
The July and June 52 week lows are at Dow 30,143-29,653; S&P 3,721-3,636; Nasdaq 10,911-10,565; and Russell 1,681-1,641. Rough math has this signaling another drop of 5% for the major indexes and 8% for the small-caps for a retest.
The failed rebound rally coming into last week and close below prior support levels on Friday favors the bears going into the rest of the month. September and October are historically known for intense selling pressure and have represented some of the biggest stock market crashes on record.
The one bit of good news for the bulls was the fact volatility held 28. This level has been challenged or cleared seven times over the past month, including Friday’s monthly peak at 28.45. Again, a close above this level will likely trip the algorithms and when the panic selling could begin.
The upcoming Fed meeting will likely result in a rate hike of 0.75%-1% with the latter last seen in 1982. This could be a sell the news event or another relief rally, depending on how the Fed, and Wall Street, spin it.
We only have one near-term trade and two longer-term trades as we have prepared for this month’s volatility. We can continue to remain patient until the whipsaw action subsides and a more trusted trend is established.
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, $29.24, up $0.40)
INTC (weekly) October 32 calls (INTC221007C00032000, $0.20, up $0.04)
Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -75%
Stop Target: None
Action: Shares showed strength on Friday despite tagging another 52-week low of $28.42 shortly after the open. New and upper support at $28.50-$28.25 was breached but held. Lower resistance at $29.25-$29.50 was cleared but also held on the rebound to $29.32.
Rocket Companies (RKT, $7.60, up $0.09)
RKT December 8 calls (RKT221216C00008000, $0.80, up $0.05)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -16%
Stop Target: None
Action: Friday’s high touched $7.62 with prior and lower resistance at $7.75-$8 easily holding. Support remains at $7.50-$7.25.
Diana Shipping (DSX, $4.73, down $0.22)
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 upper support at $4.70-$4.60 was breached but held following the intraday dip to $4.63. Lowered resistance is at $4.80-$4.90.
