MomentumOptions.com Pre-Market Update for 9/22/2022
Mid-July Lows Back in Focus
8:00am (EST)
The stock market showed continued weakness on Wednesday following news the Fed raised interest rates for the fifth time this year. It was also the third-straight three-quarter point hike, bringing the federal funds rate to a range of 3%-3.25%, its highest level since 2008.
It was a volatile session as the bulls held the higher open into the announcement before a nosedive into negative territory ensued. There was a slight recovery as Fed Chair Powell spoke but he was unable to charm Wall Street this time around as the bears pushed prior lows from mid-July.
The Nasdaq sagged to a late day low of 11,218 before finishing at 11,220 (-1.8%). Upper support at 11,250-11,100 failed to hold. A drop below the latter would indicate a further slide to 11,000-10,850.
The S&P 500 settled at 3,789 (-1.7%) and the session low. Prior and upper support at 3,800-3,775 was tripped and failed to hold. A fade below the latter would be an ongoing bearish development with backtest potential towards 3,750-3,725.
The Dow bottomed out at 30,181 while ending at 30,183 (-1.7%). Prior and upper support at 30,250-30,000 failed to hold. A close below the latter would suggest a retest to 29,750 with the mid-June 52-week low at 29,653.
The Russell 2000 closed at 1,762 (-1.4%) with the second half low kissing 1,761. Prior and upper support from mid-July at 1,775-1,750 was breached and failed to hold. A move below the latter would signal additional downside pressure towards 1,725-1,700. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) was up for the second-straight day after zooming to an intraday high of 30.18. Fresh and lower resistance at 30-30.50 was cleared but held. A close above the latter would be a renewed bearish setup for the market with additional strength to 32-32.50.
Support remains at 26-25.50.
Market Analysis
The Invesco QQQ Trust (QQQ) is showing signs of breaking down out of a four-session trading range following the late session slide to $283.42. Upper support at $283.50-$283 was breached but held. A close below the latter would suggest additional downside action towards $281.50-$281.
Resistance is at $289.50-$290.
RSI (relative strength indicator) is back in a downtrend after failed to hold key support at 35. Continued closes below this level would indicate weakness towards 30 and the low from mid-June and May. Resistance is at 40.
Sector
The MSCI Emerging Markets iShares (EEM) was down for the second-straight session and for the fourth time in five after tagging a fresh 52-week low of $37.02. New and upper support at $37.50-$37 was breached and failed to hold. A close below the latter would indicate pullback potential towards $36-$35.50.
Resistance is at $38-$38.50.
RSI is trending lower key support at 35 failing to hold. Continued closes below this level would signal weakness towards 30 and the May low. Resistance is at 40.
Market Outlook
It has been a frustrating month to trade the market following the failed four-session rally off the beginning of the month support levels. This week’s, and today’s, whipsaw action was somewhat expected with the pending Fed news on interest rates.
Wednesday’s losses were the first time this year the market has fallen following the rate announcement. The previous four times produced gains of 2%-3%, on average, for the S&P 500.
The bulls have been able to hold volatility below 28 since late August and wouldn’t you know it, yesterday’s close at 27.99 keeps that streak intact. Amazing.
The RSI level on the VIX is at 61 and signaling overbought territory as the 60 level has basically been holding since mid-June. However, the April peak reached 70.
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, $28.47, down $0.49)
INTC (weekly) October 32 calls (INTC221007C00032000, $0.10, down $0.05)
Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -87%
Stop Target: None
Action: Shares traded to a low of $28.46 with key support at $28.50 failing to hold. Resistance is at $28.75-$29.
We will likely close this trade on Monday despite shares remaining in oversold territory. We were looking for a close back above $30 this week but a close below last Friday’s 52-week low at $28.42 will likely signal lower lows.
Rocket Companies (RKT, $7.31, down $0.05)
RKT December 8 calls (RKT221216C00008000, $0.65, unchanged)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -36%
Stop Target: None
Action: Upper support at $7.25-$7 was challenged but held following the slide to $7.26. Resistance is at $7.50-$7.75.
Diana Shipping (DSX, $4.64, down $0.15)
DSX December 6 calls (DSX221216C00006000, $0.10, unchanged)
Entry Price: $0.40 (8/18/2022)
Exit Target: $1.00
Return: -75%
Stop Target: None
Action: Wednesday’s low kissed $4.61 with upper support at $4.70-$4.60 failing to hold. Resistance is at $4.80-$4.90.
