MomentumOptions.com Pre-Market Update for 11/29/2022
Market Slips as Fed Speak Returns
8:00am (EST)
The stock market retreated on Monday following comments from St. Louis Fed President Bullard and concern from escalating events in China. Bullard stated the U.S. central bank has a ways to go on interest rates and that the federal funds rate needed to be raised to 5%-5.25% to be sufficiently restrictive to tame inflation.
Meanwhile, widespread protests in China that began over the weekend in regard to the country’s zero tolerance covid policies continued and were trying to be contained. The events pushed volatility higher by 8% with fresh resistance levels holding.
The Russell 2000 finished at 1,830 (-2.1%) with the late day low tapping 1,827. Upper support at 1,850-1,825 and the 20-day moving average failed to hold. A close below the latter would indicate weakness to 1,800-1,775 and the 50-day moving average. Below is a chart of the IWM.
The Nasdaq ended at 11,049 (-1.6%) after bottoming at 11,020. Key support at 11,000 was challenged and held. A drop below this level would imply a further slide to 10,900-10,750 and the 20/ 50-day moving averages.
The S&P 500 traded down to 3,955 before settling at 3,963 (-1.5%). Current and upper support at 3,975-3,950 was breached and failed to hold. A fade below the latter would signal ongoing weakness towards 3,925-3,900 and the 20-day moving average.
The Dow closed at 33,849 (-1.5%) with the low touching 33,799. Near-term and upper support at 34,000-33,750 failed to hold. A move below the latter would suggest a further pullback towards 33,500-33,250 and the 20-day moving average.
Volatility Index
The Volatility Index (VIX) was up for the second-straight session with the peak reaching 22.50. New and lower resistance at 22.50-23 was kissed and held. A close above the latter would indicate strength to 23.50-24 and the 20-day moving average.
Support is at 22-21.50.
Market Analysis
The SPDR S&P 500 ETF (SPY) was down for the second-straight session with the low at $395.11. Prior and upper support at $395.50-$395 was breached but held. A drop below the latter would imply additional weakness to $393-$392.50.
Resistance is at $400-$400.50.
RSI (relative strength index) is in a downtrend with upper support at 55-50 holding. A close below the latter would signal further downside action towards 45-40 and levels from earlier this month. Resistance is at 60-65.
Sector
The Energy Select Sector Spider (XLE) extended its losing streak to three-straight sessions with the intraday low reaching $89.05. Current and upper support at $89.50-$89 failed to hold. A close below the latter would signal additional weakness towards $88-$87.50.
Resistance is at $90.50-$91.
RSI remains in a downtrend with key support at 50 failing to hold. Continued closes below this level would suggest further weakness to 45-40 and prior levels from late September. Resistance is at 55-60.
Market Outlook
Yesterday’s losses pushed the Dow and S&P back into their prior trading ranges and the Nasdaq and the Russell to the bottom of their ongoing 12-session trading ranges. A breakdown out of these trading ranges for the latter two would be a slightly bearish development for the overall market.
Another negative would be if the VIX clears and holds 24 today. If so, I could have a new bearish trade in the QQQ’s.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-19 (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.
Pure Storage (PSTG, $29.54, down $0.92)
PSTG December 32 calls (PSTG221216C00032000, $0.85, down $0.25)
Entry Price: $1.75 (11/14/2022)
Exit Target: $3.50
Return: -47%
Stop Target: None
Action: Yesterday’s low hit $29.45 with upper support at $29.50-$29.25 getting breached but holding. Resistance is at $29.75-$30.
Verizon Communications (VZ, $38.24, down $0.78)
VZ December 40 calls (VZ221216C00040000, $0.20, down $0.25)
Entry Price: $0.55 (11/2/2022)
Exit Target: $1.10
Return: -63%
Stop Target: None
Action: Prior and upper support at $38.25-$38 failed to hold following the tumble to $38.13. Lowered resistance is at $38.50-$38.75.
Rocket Companies (RKT, $7.60, down $0.13)
RKT December 8 calls (RKT221216C00008000, $0.30, down $0.05)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -68%
Stop Target: None
Action: Shares tagged a low of $7.44 with support at $7.50-$7.25 getting tripped but holding. Resistance is at $7.75-$8.
