MomentumOptions.com Pre-Market Update for 12/19/2022
Bears Push Monthly Lows
8:00am (EST)
The stock market extended its losing streak to three-straight sessions with Friday’s losses pushing another round of monthly lows. A disappointing report from S&P Global’s services PMI showed output fell to a four-month low, with its manufacturing index sinking to a 31-month low of 46.2 in December.
The S&P 500 settled at 3,852 (-1.1%) after stumbling to an intraday low of 3,827. Early November and key support at 3,850 was breached but held on the close back below the 50-day moving average. A drop below the latter would suggest additional weakness to 3,800-3,750. Resistance is at 3,900 and prior support that had been holding since mid-November.
The Nasdaq tested a low of 10,642 before going out at 10,705 (-1%). New and upper support at 10,750-10,600 failed to hold. A fade below the latter would indicate an ongoing retreat towards 10,500-10,350. Lowered resistance at 10,850-11,000 and the 50-day moving average.
The Dow ended at 32,920 (-0.9%) with the low touching 32,654. Fresh and upper support 32,750-32,500 was tripped but held. A close below the latter and the 50-day/ 200-day moving averages would signal weakness to 32,250-32,000. New resistance is at 33,250-33,500.
The Russell 2000 bottomed at 1,746 before finishing at 1,763 (-0.6%). Early November and key support at 1,750 was breached but held. A close below this level would imply a further slide towards 1,725-1,700. Lowered resistance is at 1,775-1,800 and the 50-day moving average. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) showed weakness despite bubbling to an intraday peak of 23.83. Lower resistance at 23.50-24 was cleared but held for the second-straight day. A move above the latter would suggest another retest towards 25.50-26.
Slightly rising support is at 22-21.50 and the 20-day moving average.
Market Analysis
The SPDR S&P 500 ETF (SPY) fell for the third-straight session with the low at $381.04. New and upper support at $381.50-$381 was breached but held on the close back below the 50-day moving average. A fade below the latter would signal additional weakness to $380-$379.50.
Lowered resistance is at $386-$386.50.
RSI (relative strength index) is in a downtrend with key support at 40 holding. A close below the latter would suggest further downside action towards 35-30 and levels from late September and early October. Resistance is at 45-50.
Sector
The Spiders S&P Homebuilders ETF (XHB) extended its losing streak to three sessions with the intraday low kissing $61.05. Current and upper support at $61.50-$61 was tripped but held. A move below the latter and the 200-day moving average would imply additional weakness towards $60-$59.50.
Resistance is at $62-$62.50 and the 20-day moving average.
RSI remains in a downtrend with key support at 50 holding. A drop below this level would suggest weakness to 45-40 and levels from the first half of November. Resistance is at 55-60.
Market Outlook
The S&P 500 joined the other major indexes in closing below the November 10th low on Friday and remains a bearish development for the overall market. The S&P also followed the Nasdaq and the Russell’s inability to hold its 50-day moving average, as well.
The Dow held its 50-day, and 200-day moving average, but the close below 33,000 was a negative outlook to end last week. As far as the small-caps, they typically show early strength if December is bullish but the Russell has led the declines after topping out to start the month.
I have talked about a breakdown out of the trading ranges likely leading to a selloff of 5%-10% for the overall market. The latter prediction would have the major indexes testing fresh 52-week lows that could come in early to mid-January and when fourth-quarter earnings season starts.
To reverse the current downtrend, the major indexes, excluding the Dow, will need to make a quick recovery back above the 50-day.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-22 (53%). 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.
Intel (INTC, $26.92, down $0.23)
INTC January 26 puts (INTC230120P00026000, $0.75, up $0.05)
Entry Price: $0.85 (12/16/2022)
Exit Target: $1.70
Return: -12%
Stop Target: None
Action: Friday’s low reached $26.45 with late October and upper support at $26.50-$26.25 getting breached but holding. Lowered resistance is at $27-$27.25.
Cisco Systems (CSCO, $47.81, down $0.34)
CSCO January 47 puts (CSCO230120P00047000, $1.05, up $0.05)
Entry Price: $0.95 (12/15/2022)
Exit Target: $1.90
Return: 11%
Stop Target: None
Action: New and upper support at $47.50-$47 was triggered but held following the intraday fade to $47.08. Lowered resistance is at $48-$48.50.
DraftKings (DKNG, $12.12, down $0.51)
DKNG January 12.50 puts (DKNG230120P00012500, $1.25, up $0.25)
Entry Price: $0.70 (12/6/2022)
Exit Target: $1.40
Return: 79%
Stop Target: 95 cents (Stop Limit)
Action: Set a Stop Limit at 95 cents to start protecting profits and to avoid a loss.
Shares tapped a low of $11.98 with early November and upper support at $12-$11.75 getting breached but holding. Lowered resistance is at $13-$13.25.
