MomentumOptions.com Pre-Market Update for 10/27/2022
Small-Caps Recover 50-Day Moving Average
8:00am (EST)
The stock market was mixed on Wednesday with Tech and the broader market posting losses following a mixed bag of earnings. Alphabet’s (GOOG) results missed forecasts while Microsoft (MSFT) posted its weakest quarterly revenue growth in five years.
The Russell 2000 closed at 1,804 (+0.5%) and back above its 50-day moving average after tagging a midday high of 1,836. Prior and lower resistance from mid-September at 1,825-1,850 was cleared but held. A move above the latter would suggest ongoing momentum towards 1,875-1,900. Below is a chart of the IWM.
The Dow reached an intraday peak of 32,172 before settling at 31,839 (+0.01%). Lower resistance from early September at 32,000-32,250 was topped but held. A move above the latter would indicate additional upside to 32,500-32,750.
The Nasdaq tumbled to a late day low of 10,948 while ending 10,970 (-2%). Fresh and upper support at 11,000-10,850 failed to hold. A fade below the latter would imply retest potential to 10,750-10,600 and the 20-day moving average.
The S&P 500 finished at 3,830 (-0.7%) following the afternoon slide to 3,824. New and upper support at 3,825-3,800 was tripped but held. A close below the latter would signal additional weakness towards 3,775-3,750.
Volatility Index
The Volatility Index (VIX) was down for the second-straight day and for the fourth time over the past five sessions after hitting a low of 27.27. Upper support at 27.50-27 and the 50-day moving average were recovered. A move below the latter would suggest weakness towards 26-25.50.
Lowered resistance is at 28-28.50.
Market Analysis
The SPDR S&P 500 ETF (SPY) was down for the first time in four sessions with the low at $381.35. Fresh and upper support at $381.50-$381 was tripped but held. A drop below the latter would indicate additional weakness to $379.50-$379.
Resistance is at $384-$384.50 and the 50-day moving average.
RSI (relative strength index) is back in a downtrend with upper support at 55-50 and holding. A close below the latter would signal further downside action towards 45-40 and levels from mid-month. Key resistance is at 60.
Sector
The Health Care Select Sector Spider (XLV) was up for the fourth-straight session with the peak reaching $132.62. Prior and lower resistance from mid-August at $132.50-$133 was cleared but held. A close above the latter would imply further upside towards $134-$134.50 with the mid-August high at $134.47.
Rising support is at $130.50-$130.
RSI remains in an uptrend with key resistance at 65 holding. A close above this level would suggest additional strength towards 70-75 and levels from early April. Support is at 60-55.
Market Outlook
Despite yesterday’s mixed results, key resistance levels are still in play with raised expectations for the Dow which has led the recent upswing. My previous target was 31,000 which has now been moved up to 32,000 and a level that was cleared yesterday. Continued closes above this level would imply upside to 32,500-32,750 and the 200-day moving average.
A few weeks ago we wanted to see the S&P above 3,800; the Nasdaq clearing 11,250; and Russell recovering 1,800. The S&P cleared 3,800 on Monday and has held this level over the past two sessions with Monday’s close at 3,797. Continued closes above 3,850 and the 50-day moving average would give us new resistance at 3,900.
The Russell cleared and held 1,800 yesterday to join the blue-chips in recovering the 50-day moving average. Continued closes above this level could have the index trading up to 1,850-1,875 and the 200-day moving average.
The Nasdaq tested highs of 11,210 and 11,205 on Tuesday and Wednesday but shy of key resistance at 11,250 and more important hurdles at 11.350-11,500 and the 50-day moving average. There are a number of Tech companies reporting today, including Apple and Intel. At a minimum, I would like to see the Nasdaq back above 11,000 today and challenging 11,250 again by Friday’s close.
As far as volatility, a close below 26.50 and the 200-day moving average on the VIX would signal overall strength in the market for the major indexes.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-18 (57%). 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.
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KraneShares CSI China Internet ETF (KWEB, $20.64, up $1.61)
KWEB November 24 calls (KWEB221118C00024000, $0.33, up $0.13)
Entry Price: $0.58 (10/21/2022)
Exit Target: $1.20
Return: -43%
Stop Target: None
Action: Wednesday’s high touched $21.07 with new and lower resistance at $21-$21.25 getting cleared but holding. Shaky but rising support is at $20.50-$20.25.
Rocket Companies (RKT, $6.40, down $0.43)
RKT December 8 calls (RKT221216C00008000, $0.20, down $0.10)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -79%
Stop Target: None
Action: Shares made a run to $7.03 before reversing course. Key resistance at $7 was tripped but held. Upper support is at $6.50-$6.25 failed to hold on the pullback to $6.39 afterwards.
Diana Shipping (DSX, $4.19, down $0.05)
DSX December 6 calls (DSX221216C00006000, $0.10, unchanged)
Entry Price: $0.40 (8/18/2022)
Exit Target: $1.00
Return: -75x%
Stop Target: None
Action: Upper support at $4.20-$4.10 failed to hold on the close on the session low. Resistance at $4.30-$4.40.
