MomentumOptions.com Pre-Market Update for 9/26/2022
Dow Tags Fresh 52-Week Low
8:00am (EST)
The stock market extended its losing streak to four-straight sessions following Friday’s losses as treasury yields pushed fresh highs. Specifically, the 10-year U.S. Treasury note zoomed above 3.7%, its highest level since 2010, while the 2-year note tagged a 15-year high and closed north of 4%.
Meanwhile, the U.S. dollar index reached a fresh 20-year peak. All of these developments along with higher interest rates around the globe weighed on Wall Street as the major indexes fell for the fourth week over the past five.
The Russell 2000 closed at 1,679 (-2.5%) after sagging to a midday low of 1,658. Prior and upper support at 1,675-1,650 was breached but held. A move below the latter and the mid-June 52-week low at 1,641 would suggest a further slide to 1,625-1,600. Below is a chart of the IWM.
The Nasdaq tested a low of 10,732 while settling at 10,867 (-1.8%). Upper support at 10,850-10,700 failed to hold. A drop below the latter would indicate downside pressure towards 10,650-10,500 with the 52-week low at 10,565.
The S&P 500 finished at 3,693 (-1.7%) after tapping a low of 3,647. Mid-June and upper support at 3,650-3,625 was tripped but held. A close below the latter and the 52-week low at 3,636 would signal additional weakness to 3,600-3,575.
The Dow plunged to a fresh 52-week low of 29,250 before ending at 29,590 (-1.6%). New and upper support at 29,250-29,000 was kissed but held. A fade below the latter would be an ongoing bearish development for further risk towards 28,750-28,500.
Volatility Index
The Volatility Index (VIX) was up for the third time in four sessions after soaring to an intraday peak of 32.31. Mid-June and lower resistance at 32-32.50 was cleared but held. A move above the latter would suggest a retest to 33.50-34.
Rising support is at 28-27.50.
Market Analysis
The Spider Small-Cap 600 ETF (SLY) fell for the fourth-straight session after testing a low of $75.79. New and upper support at $76-$75.50 was tripped but held. A fade below the latter would indicate additional downside action towards $74-$73.50.
Lowered resistance is at $77.50-$78.
RSI (relative strength indicator) remains in a downtrend with key support at 30 failing to hold. Continued closes below this level would suggest weakness to 25-20 and oversold levels from March 2020. Resistance is at 35-40.
Sector
The Real Estate Select Sector Spider (XLRE) extended its losing streak to five-straight sessions after tapping an intraday low of $37.01. Upper support at $37.50-$37 failed to hold. A close below the latter would signal additional weakness towards $36-$35.50.
Resistance is at $38-$38.50.
RSI remains in an downtrend with upper support at 25-20 failing to hold. A close above the latter would indicate downside action towards the high teens and levels from March 2020. Resistance is at 30.
Market Outlook
The RSI levels for the major indexes all fell below 30 to extend oversold levels. I talked about RSI testing the January lows from this year and this was confirmed on Friday.
I also highlighted the possibility of the low 20’s and high teens coming into play and where RSI levels fell during the March 2020 pandemic crisis. While there was a bounce afterwards towards 40-45 afterwards, that included a market rebound, the RSI levels quickly returned to the low 30’s, high 20’s within a few months.
With earnings season just around the corner, there is a good chance this scenario repeats itself. However, there have already been major warnings from a number of high profile companies that could weigh on 3Q earnings estimates and forecasts going forward.
The rest of the major indexes will likely follow the Dow’s lead by testing fresh 52-week lows at some point to start the week. Once confirmed there could be a bottoming process into the start of the third-quarter earnings season with a possible trading range developing.
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.
ProShares Bitcoin Strategy ETF (BITO, $11.55, down $0.32)
BITO October 10.50 puts (BITO221021P00010500, $0.57, up $0.07)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: 12%
Stop Target: None
Action: Friday’s fresh 52-week low kissed $11.37 with key support at $11.50 getting breached but holding. Continued closes below this level would suggest near-term weakness towards $11.25-$11. Resistance is at $11.75-$12.
Intel (INTC, $27.52, down $0.55)
INTC (weekly) October 32 calls (INTC221007C00032000, $0.04, down $0.02)
Entry Price: $0.80 (9/9/2022)
Exit Target: $1.60
Return: -95%
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
Rocket Companies (RKT, $7.00, down $0.13)
RKT December 8 calls (RKT221216C00008000, $0.55, unchanged)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -42%
Stop Target: None
Action: Prior and upper support at $7-$6.75 was tripped but held following the intraday dip to $6.78. Resistance is at $7.25-$7.50.
Diana Shipping (DSX, $4.22, down $0.35)
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: Shares tested a low of $4.22 with prior and upper support from early July at $4.30-$4.20 failing to hold. Lowered resistance is at $4.40-$4.50 and the 200-day moving average.
