MomentumOptions.com Pre-Market Update for 11/4/2022
Market Falters for the Fourth-Straight Day
8:00am (EST)
The stock market showed continued weakness on Thursday following news from overseas the Bank of England copied the Fed’s move by raising interest rates by 75 basis points. The major indexes did make a slight recovery off the morning lows, with the blue-chips and the small-caps making a run into positive territory, but the gains failed to hold into the closing bell.
The Nasdaq ended at 10,342 (-1.7%) after tagging an opening low of 10,319. Prior and upper support at 10,400-10,250 failed to hold. A drop below the latter would imply a further slide to 10,150-10,000 with the mid-October 52-week low at 10,088.
The S&P 500 traded down to 3,698 before finishing at 3,719 (-1.1%). Fresh and upper support at 3,700-3,675 was triggered but held. A drop below the latter would signal ongoing weakness towards 3,650-3,625.
The Dow closed at 32,001 (-0.5%) with the low kissing 31,727. New and upper support at 31,750-31,500 was breached but held. A fade below the latter would suggest a further pullback towards 31,250-31,000.
The Russell 2000 tested a low of 1,758 while finishing at 1,779 (-0.5%). Upper support at 1,775-1,750 and the 50-day moving average were clipped but levels that held. A close below the latter and the 50-day moving average would indicate weakness to 1,725-1,700. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) made a morning run to 26.87 with lower resistance at 26.50-27 and the 200-day moving average getting cleared but holding for the third-straight day. A close above the latter would suggest a retest towards 28-28.50 and the 50-day moving average.
Key support remains at 25.50.
Market Analysis
The Spiders Dow Jones Industrial Average ETF (DIA) tested a low of $317.18 to extend its losing streak to four-straight sessions. Fresh and upper support at $317.50-$317 was breached but held. A close below the latter would be an ongoing bearish development for a further slide to $315.50-$315.
Resistance is at $321.50-$322.
RSI has flatlined with key support at 60 failing to hold. Continued closes below this level would indicate downside action towards 55-50 and prior levels from the back half of October. Resistance is at 65-70.
Sector
The Utilities Select Spider (XLU) rebounded despite tapping an intraday low of $65.40. Current and upper support at $65.50-$65 was busted but held. A close below the latter would suggest downside pressure to $64-$63.50.
Resistance is at $67-$67.50.
RSI is trying to stabilize with key support at 50 holding. A close below this level would signal weakness towards 45-40 and levels from a couple of weeks ago. Resistance is at 55-60.
Market Outlook
The bulls are once again in treacherous territory as the possibility of fresh 52-week lows is once again in focus. The bullish technical setups that the major indexes were displaying ahead of this week’s Fed announcement changed on a dime once the news was digested and signaled the possibility of lower lows returning.
At the moment, the Nasdaq is in the worst position to test a new yearly low, with the rest of the major indexes having a few more layers of support. The fact the VIX continues to hold key resistance levels has been somewhat of a surprise but this could change today or next week.
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.
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.
Verizon Communications (VZ, $37.15, down $0.56)
VZ December 40 calls (VZ221216C00040000, $0.35, down $0.10)
Entry Price: $0.55 (11/2/2022)
Exit Target: $1.10
Return: -34%
Stop Target: None
Action: Upper support at $37.25-$37 failed to hold with the late session low at $37.12. Lowered resistance is at $37.50-$37.75.
KraneShares CSI China Internet ETF (KWEB, $21.07, up $0.69)
KWEB November 24 calls (KWEB221118C00024000, $0.30, up $0.10)
Entry Price: $0.58 (10/21/2022)
Exit Target: $1.20
Return: -48%
Stop Target: None
Action: Thursday’s peak reached $21.36 with key resistance at $21 getting cleared and holding. Support remains at $20.25-$20.
Rocket Companies (RKT, $6.51, down $0.10)
RKT December 8 calls (RKT221216C00008000, $0.25, down $0.05)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -74%
Stop Target: None
Action: Upper support at $6.50-$6.25 was tripped but held following the intraday fade to $6.29. Resistance remains at $6.75-$7 and the 20-day moving average.
Diana Shipping (DSX, $4.23, up $0.01)
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: Upper support at $4.10-$4 was kissed but held on the session low. Lowered resistance is at $4.30-$4.40 and the 50-day moving average.
