MomentumOptions.com Pre-Market Update for 12/13/2022
Dow Recovers 34,000
8:00am (EST)
The stock market started the week in positive territory as Wall Street awaits this morning’s consumer price index (CPI) report and Wednesday’s update on interest rates. CPI forecasts are calling for an increase by 0.3%, with the year-over-year print falling from 7.7% to 7.3%.
Wednesday marks the conclusion of a two-day Fed policy meeting, with traders expecting a 0.5% increase in the benchmark rate. The gains gave the major indexes some wiggle room off of the bottom of the month long trading ranges.
The Dow closed on the session peak at 34,005 (+1.6%). Key resistance at 34,000 was reclaimed. Continued closes above this level would imply a retest towards 34,250-34,500 with the start of the month high at 34,595.
The S&P 500 settled on its high of 3,990 (+1.4%). Current and lower resistance at 3,975-4,000 was topped and held. A close above the latter would signal a further run towards 4,025-4,050.
The Nasdaq ended at 11,143 (+1.3%) with the session peak hitting 11,144. Lower resistance at 11,100-11,250 was cleared and held. A close above the latter would suggest additional strength towards 11,350-11,500.
The Russell 2000 finished at 1,818 (+1.2%) with the late day high tapping 1,820. Lower resistance at 1,800-1,825 was recovered. A pop above the latter and the 200/ 20-day moving averages would indicate strength to 1,850-1,875. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) was up for the fifth time in six sessions after surging to a high of 25.05. Lower resistance from mid-November at 25-25.50 was cleared but held. A close above the latter would get 26 and the 50/ 200-day moving averages in focus.
Fresh support is at 24-23.50.
Market Analysis
The Invesco QQQ Trust (QQQ) was up for the second time in three sessions after trading up to $285.64. Near-term and lower resistance at $285.50-$286 was cleared and held. A pop above the latter would imply strength towards $287.50-$288.
Support is at $281.50-$281.
RSI (relative strength indicator) is back in an uptrend with key resistance at 50 getting recovered. Continued closes above this level would suggest a run to 55-60 and levels from a few weeks ago. Support is at 45-40.
Sector
The Consumer Staples Select Spiders (XLP) bounced back after testing an intraday high of $76.70. Lower resistance at $75.50-$76 was reclaimed. A move above the latter would signal upside action towards $77-$77.50.
Key support is at $75.50 and the 20-day moving average.
RSI is back in an uptrend with key resistance at 60 getting topped and holding. Continued closes above this level would indicate further strength to 65-70 and levels from late November. Support is at 55-50.
Market Outlook
The activity in the VIX wasn’t unusual given the possible impact over the next two days concerning inflation and interest rates. In a perfect world for the bulls, the VIX will tag 26 and retreat after Wednesday’s Fed update.
If there is a continued closes above 26 at anytime this week, the near-term outlook would turn bearish with the major indexes failing to hold the bottom of the current trading ranges.
Our next trade, or two, will come out after Wednesday’s Fed update, unless today’s action is dramatic.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-21 (54%). 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.
DraftKings (DKNG, $14.31, up $0.35)
DKNG January 12.50 puts (DKNG230120P00012500, $0.60, down $0.10)
Entry Price: $0.70 (12/6/2022)
Exit Target: $1.40
Return: -14%
Stop Target: None
Action: Shares tagged a low of $13.46 with prior and upper support from mid-November at $13.50-$13.25 getting tripped but holding. Resistance is at $14.50-$14.75 and the 50-day/ 20-day moving averages.
Rocket Companies (RKT, $8.49, up $0.22)
RKT December 8 calls (RKT221216C00008000, $0.60, up $0.10)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -37%
Stop Target: 25 cents (Stop Limit)
Action: Lower resistance at $8.50-$8.75 was cleared but held by a penny following the run to $8.52. Support remains at $8.25-$8.