MomentumOptions.com Pre-Market Update for 9/27/2022
S&P Triggers Fresh 52-Week Closing Low
8:00am (EST)
The stock market tried to stabilize on Monday after opening mostly higher while holding positive territory throughout the morning. The gains started to fade into the afternoon as ongoing Fed news and interest rates remained in focus.
The losses pushed the blue-chips into official bear market territory, again, with the S&P avoiding a 52-week low but not a closing low. The small-caps once again slacked and led the way lower while Tech suffered the least amount of damage.
The Russell 2000 tested an afternoon low of 1,653 before settling at 1,655 (-1.4%). Current and upper support at 1,675-1,650 failed to hold. A drop below the latter and the mid-June 52-week low at 1,641 would indicate additional selling pressure towards 1,625-1,600. Below is a chart of the IWM.
The Dow closed at 29,260 (-1.1%) after hitting a fresh 52-week low of 29,161. Upper support at 29,250-29,000 was breached but held for the second-straight session. A move below the latter would suggest ongoing weakness to 28,750-28,500.
The S&P 500 settled at 3,655 (-1%) with the second half low reaching 3,644. Mid-June and upper support at 3,650-3,625 was breached but also held for the second-straight session. A fade below the latter and the 52-week low at 3,636 would be an ongoing bearish development with further downside risk towards 3,600-3,575.
The Nasdaq bottomed out at 10,789 while settling at 10,802 (-0.6%). Near-term and upper support at 10,750-10,600 was challenged but held. A close below the latter and the 52-week low at 10,565 would signal weakness to 10,500-10,350.
Volatility Index
The Volatility Index (VIX) was up for the second-straight session and for the fourth time in five with the high tagging 32.88. Mid-June and lower resistance at 32.50-33 was cleared but held. A pop above the latter would be an ongoing bearish setup for the market with upside risk towards 34-34.50.
Rising support is at 30-29.50.
Market Analysis
The Spiders Dow Jones Industrial Average ETF (DIA) extended its losing streak to five-straight with the low at $291.49. Fresh and upper support at $291.50-$291 was tripped but held. A close below the latter would indicate additional selling pressure down to $290-$289.50.
Lowered resistance is at $295.50-$296.
RSI remains in a downtrend with key support at 25 holding. A move below this level would indicate downside action towards the 20 area and the March 2020 lows. Resistance is at 30.
Sector
The Technology Select Sector Spiders (XLK) showed continued weakness after testing an intraday low of $122.53. Current and upper support at $123-$122.50 failed to hold. A fade below the latter would suggest a further slide towards $121-$120.50.
Resistance is at $125-$125.50.
RSI is in a downtrend after failing to hold key support at 30. Continued closes below this level would signal additional weakness towards 25-20 and levels from March 2020, as well. Resistance is at 35-40.
Market Outlook
Yesterday’s action confirmed money is still moving out of the market with the Friday/ Monday negative closes and lower lows. However, it did feel like the possible start of a bottoming process as long as the VIX holds 34-35 this week.
The RSI levels remain in oversold territory with the Nasdaq now below 30 and the rest of the major indexes in the mid-20’s. It would be nice to pull the bandaid off and get the test to the low-20’s but it continues to be a frustrating market to trade.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-16 (60%). 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, $11.81, up $0.26)
BITO October 10.50 puts (BITO221021P00010500, $0.47, down $0.10)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -8%
Stop Target: None
Action: Shares rebound to a high of $11.88 with lower resistance at $11.75-$12 getting cleared and holding. Support is at $11.50-$11.25.
Rocket Companies (RKT, $6.72, down $0.28)
RKT December 8 calls (RKT221216C00008000, $0.48, down $0.07)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -49%
Stop Target: None
Action: Prior and upper support at $6.75-$6.50 failed to hold with the afternoon pullback hitting $6.70. Lowered resistance is at $7-$7.25.
Diana Shipping (DSX, $3.88, down $0.34)
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: Monday’s low kissed $3.84 with fresh and upper support at $3.90-$3.80 failing to hold. Lowered resistance is at $4-$4.10.
