MomentumOptions.com Pre-Market Update for 9/29/2022

Dow/ S&P Snap Six-Session Losing Streaks

8:00am (EST)

The stock market made a strong move on Wednesday after bouncing off oversold levels as bond yields stabilized. Specifically, the 10-year Treasury yield declined the most since 2020, after briefly topping 4%, following news the Bank of England will begin a bond-buying plan to stabilize the British pound.

The Russell 2000 reached a peak of 1,725 before ending at 1,715 (+3.2%). Mid-July and lower resistance at 1,725-1,750 was kissed but held. A close above the latter would signal upside action towards 1,775-1,800. Below is a chart of the IWM. 

The Nasdaq finished at 11,051 (+2.1%) with the afternoon high hitting 11,101. Key resistance at 11,000 was cleared and held. Continued closes above this level below would be a slightly bullish development for additional strength to 11,150-11,300.

The S&P 500 settled at 3,719 (+2%) after tagging a late day peak of 3,736. New and lower resistance at 3,725-3,750 was topped but held. A move above the latter would indicate ongoing strength towards 3,775-3,800.

The Dow made a run to 29,811 while closing at 29,683 (+1.9%). Fresh and lower resistance at 29,750-30,000 was cleared but held. A pop above the latter would suggest a retest to 30,250-30,500.

Volatility Index

The Volatility Index (VIX) fell for the first time in four session despite tapping an opening high of 34.88. Key resistance from the first halves of May and June at 35 was challenged but held.

The final hour fade to 30.03 afterwards pushed key support at 30. Continued closes back below this level would be a slightly bullish signal for the market.

Market Analysis

The iShares Russell Growth 1000 ETF (IWF) was up for the second-straight session with the high at $220.35. Current and lower resistance at $220-$220.50 was cleared but held. A close above the latter would indicate upside action towards $222-$222.50.

Shaky support is at $214.50-$214.

RSI (relative strength index) is trending higher with lower resistance at 35-40 getting recovered. A close above the latter would suggest strength towards 45-50 and levels from earlier this month. Key support is at 30.

Sector

The Consumer Staples Select Spiders (XLP) bounced back after testing a late day high of $69.39. Lower resistance at $69-$69.50 was cleared and held. A pop above the latter would signal additional strength towards $70.50-$71.

Support is at $68-$67.50.

RSI is back in an uptrend with lower resistance at 35-40 holding. A close above the latter would indicate further strength to 45-50 and levels from earlier this month, as well. Support is at 30-25.

Market Outlook

I talked about the possibility of a bottoming process this week with a trading range developing over the next couple of weeks and into earnings season. The charts show a mini range has, in fact, formed over the past four sessions with key resistance and support levels clearly outlined.

The more important aspect of the trading ranges is that current support levels represent prior resistance levels. Before we get into key targets, it will be crucial the bulls hold current support levels going forward. If not, the recent selloff could get much worse.

As far as the Dow, key support is at 29,000 and a level that was breached but held on Tuesday. This area also represented key resistance in January and September 2020. A drop below 29,000 could easily get 28,000-27,000 back in focus. A close above 30,000 would suggest a possible near-term bottom.

For the S&P 500, the index has held 3,600 this week with Tuesday’s low at 3,623. This level represented key resistance in September and November 2020. A move below 3,600 reopens downside risk to 3,500-3,400. A move above 3,800 would indicate a possible near-term low.

The Nasdaq has basically been holding 10,750 over the past four sessions with some wiggle room down to 10,500 on a close below this level. The biggest concern would be a close below 10,500 and the the mid-June 52-week low at 10,565. This would likely get 10,100-10,000 in focus and levels from early July 2020. Major resistance over the near-term is at 11,250.

As for the Russell 2000, the index has held crucial support at 1,650 over the past four sessions, as well. This level was prior resistance from October and November 2020. A close below 1,650 and the mid-June 52-week low at 1,641 would be a renewed bearish development with downside risk potential towards 1,525-1,500. The first level of resistance is at 1,750 to suggest some of the selling pressure is over.

I will try to incorporate these charts into next week’s action after we see how the rest of the week unfolds. The fact the VIX held 35 (again) was also a slightly bullish development from yesterday.

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, $12.05, up $0.31)

BITO October 10.50 puts (BITO221021P00010500, $0.38, down $0.12)

Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -25% 
Stop Target: None

Action: Shares traded up to $12.12 with key resistance at $12 getting recovered. Support remains at $11.75-$11.50. A close below the latter and the 52-week low at $11.37 should get this trade rolling.

Rocket Companies (RKT, $6.71, up $0.15)

RKT December 8 calls (RKT221216C00008000, $0.45, up $0.05)

Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -53% 
Stop Target: None

Action: Lower resistance at $6.75-$7 was topped but held with the session peak at $6.76. Key support is at $6.50.

Diana Shipping (DSX, $3.82, 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 touched $3.80 with upper support at $3.85-$3.75 failing to hold. Resistance is at $3.90-$4.