MomentumOptions.com Pre-Market Update for 10/10/2022
Strong Jobs Report Rattles Wall Street
8:00am (EST)
The stock market fell for the third-straight session on Friday as a better-than-expected jobs report likely keeps the Fed’s aggressive monetary policy tightening in focus. Specifically, employers added 263,000 jobs last month while the unemployment rate fell to 3.5%, matching a 50-year low.
The Nasdaq closed at 10,652 (-3.8%) after touching a late day low of 10,608. 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 tapped a low of 1,694 before ending at 1,702 (-2.9%). Upper support at 1,700-1,675 was tripped but held. A drop below the latter would indicate additional selling pressure towards 1,650-1,625 with the 52-week low from mid-June at 1,641. Below is a chart of the IWM.
The S&P 500 settled at 3,639 (-2.9%) with the second half low reaching 3,620. Prior and upper support at 3,625-3,600 was breached but held. A fade below the latter and the recent 52-week low at 3,584 would be another bearish development with further downside risk to 3,575-3,550.
The Dow finished at 29,296 (-2.1%) after hitting a low of 29,142. Upper support at 29,250-29,000 was breached but held. A close below the latter would suggest weakness towards 28,750-28,500 with the September 30th low at 28,715.
Volatility Index
The Volatility Index (VIX) was up for the second-straight day with the peak reaching 32.02. Lower resistance at 32-32.50 was cleared but held. A move above the latter would suggest upside action to 33-35.
Support is at 30-29.50.
Market Analysis
The iShares Russell Growth 1000 ETF (IWF) was down for the third-straight session with the low at $211.75. Prior and upper support at $212-$211.50 was tripped but held. A close below the latter would indicate downside action towards $210-$209.50 with the June low at $207.97.
Resistance is at $217-$217.50.
RSI (relative strength index) is in a downtrend with upper support at 35-30 holding. A close below the latter would suggest weakness towards 25-20 and levels from late last month. Resistance is at 40-45.
Sector
The Energy Select Sector Spider (XLE) had its four-session winning streak snapped despite the intraday peak reaching $83.54. Prior and lower resistance from late August at $83.50-$84 was cleared but held. A close above the latter would signal additional strength towards $85.50-$86.
Support is at $80.50-$80.
RSI has rolled over with key support at 60 holding. A close below this level would suggest a further fade to 55-50. Resistance is at 65-70.
Market Outlook
Despite three days of selling pressure, the major indexes were actually up for the week as last Monday and Tuesday’s gains outpaced the pullback. However, it was the fourth-straight negative Friday and highlights the nervousness of traders wanting to stay long over the weekend.
The RSI levels for the major indexes from last week’s two-day rally spiked to 50, on average, and the mini-three day trading range afterwards was just enough to give a neutral reading for the market heading into Friday’s jobs report. The problem for the bulls again is that RSI levels are not at oversold levels and could fall below 30 again.
This would mean additional selling pressure could be in play as Wall Street gets ready for the start of the third-quarter earnings season. It also means another failed rally could be in store with the chance of fresh 52-week lows being a strong possibility.
Lowered earnings forecasts and revenue numbers have punished a number of bellwether stocks coming into this month and could be a warning for what kind of action October could bring.
The biggest clue if more intense selling pressure will come from the VIX and if the bears can clear and hold the 35 level. We still haven’t felt a true capitulation moment this year but could at some point this month.
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.
Tyson Foods (TSN, $63.89, down $1.63)
TSN October 70 calls (TSN221021C00070000, $0.10, down $0.15)
Entry Price: $0.50 (10/3/2022)
Exit Target: $1.00
Return: -80%
Stop Target: None
Action: Shares kissed another 52-week low of $63.44 with fresh and upper support at $64.50-$64 getting breached but holding. Resistance is at $66-$66.50.
We are going to need a 10% move in the stock to get back to even and with the options expiring in less than two weeks, this might be a stretch. Let’s see where shares are at by the end of the week before exiting as we may be able to get back some premium if shares rebound.
ProShares Bitcoin Strategy ETF (BITO, $11.96, down $0.39)
BITO October 10.50 puts (BITO221021P00010500, $0.20, unchanged)
Entry Price: $0.51 (9/22/2022)
Exit Target: $1.05
Return: -61%
Stop Target: None
Action: Upper support at $12-$11.75 failed to hold following the fade to $11.89. Lowered resistance is at $12.25-$12.50.
Rocket Companies (RKT, $6.69, down $0.30)
RKT December 8 calls (RKT221216C00008000, $0.35, down $0.10)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -63%
Stop Target: None
Action: Key support at $6.50 was tripped but held with the low hitting $6.46. Lowered resistance is at $6.75-$7.
Diana Shipping (DSX, $4.17, up $0.12)
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: Friday’s peak reached $4.23 with lower resistance at $4.20-$4.30 getting cleared but holding. Support remains at $4-$3.90.
