MomentumOptions.com Pre-Market Update for 9/30/2022
Bears Return, Trading Range Continues
8:00am (EST)
The stock market retreated again on Thursday as the bulls failed to show any follow thru from the prior session’s rebound rally. A couple of earnings misses from CarMax (KMX) and Bed Bath & Beyond (BBBY) weighed on sentiment as did a downgrade of Apple (AAPL).
The Nasdaq tested an afternoon low of 10,623 while settling at 10,737 (-2.8%). Near-term and upper support at 10,750-10,600 failed to hold. A close below the latter and the mid-June 52-week low at 10,565 would signal weakness to 10,500-10,350.
The Russell 2000 bottomed out at 1,656 before settling at 1,674 (-2.4%). Current and upper support at 1,675-1,650 was tripped and failed to hold. A drop below the latter and the 52-week low at 1,641 would indicate additional selling pressure towards 1,625-1,600. Below is a chart of the IWM.
The S&P 500 settled at 3,640 (-2.1%) with the second half and fresh 52-week low reaching 3,610. New and upper support at 3,625-3,600 was breached but held. A fade below the latter would be another bearish development with further downside risk to 3,575-3,550.
The Dow closed at 29,225 (-1.5%) after hitting a low of 28,997. Key support at 29,000 was breached for the second time in three sessions but held. A close below this level would suggest weakness towards 28,750-28,500.
Volatility Index
The Volatility Index (VIX) was up for the fourth time over the past five sessions after reaching a peak of 33.46. Current and lower resistance at 33-33.50 was cleared but held. A pop above the latter gets 34-35 back in play.
Support is at 31-30.50.
Market Analysis
The Wilshire 5000 Composite Index (WLSH) fell for the seventh time in eight sessions with the fresh 52-week low at 36,024. Key support from mid-June at 36,000 was challenged but held. A close below this level would signal additional weakness to 35,750-35,500.
Resistance is at 36,500-36,750 with a close above 37,000 being a more bullish signal.
RSI (relative strength index) is back in a downtrend with key support at 30 holding. A close below this level would indicate weakness to 25 and the low for the month. Resistance is at 35-40.
Sector
The Dow Jones Transportation Average (TRAN) had its two-session winning streak snapped following the pullback to 12,134. Key support at 12,000 was challenged but held. A close below this level would be a bearish signal for a further slide to 11,900-11,750.
Resistance is at 12,350-12,500.
RSI has rolled over with key support at 30 holding. A move below this level would indicate weakness towards 25-20 and the recent lows. Resistance is at 35-40.
Market Outlook
Despite another nasty pullback, the major indexes remained in a five-session trading range. However, the Nasdaq and the S&P made a lower monthly and 52-week low, respectively, and could be hinting the bottom of these trading ranges might be in jeopardy.
This morning’s update on the economy and inflation could be a major market mover as the Fed closely watches the PCE Price Index. There are four Fed officials that will be speaking, or making comments, between the release and when the market closes.
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, $11.96, down $0.09)
BITO October 10.50 puts (BITO221021P00010500, $0.40, up $0.02)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -23%
Stop Target: None
Action: Thursday’s low kissed $11.57 with upper support at $11.75-$11.50 getting tripped but holding. Resistance is at $12-$12.25.
Rocket Companies (RKT, $6.47, down $0.24)
RKT December 8 calls (RKT221216C00008000, $0.35, down $0.10)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -62%
Stop Target: None
Action: Key support at $6.50 failed to hold following the fade to $6.30. A close below $6.25 and the 52-week low at $6.27 could lead to weakness towards $6. Resistance is at $6.75-$7.
Diana Shipping (DSX, $3.61, down $0.21)
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 traded down to $3.53 with key support at $3.50 getting challenged but holding. Lowered resistance is at $3.70-$3.80.
