MomentumOptions.com Pre-Market Update for 1/9/2023
Trading Ranges Hold Despite 2% Rally
8:00am (EST)
The stock market snapped out of a funk on Friday with the bulls getting the weekly win after a strong employment report. Specifically, the December numbers showed the U.S. economy added 223,000 jobs with the unemployment rate falling to 3.5%.
Forecasts were for a reading of 200,000 jobs added and an unchanged unemployment rate at 3.7%, respectively. The report also showed wage growth decelerated last month and a possible bullish sign the Fed may start to ease their rate hikes.
The Nasdaq finished at 10,569 (+2.6%) after trading to a high of 10,604. Current and lower resistance at 10,600-10,750 was topped but held. A pop above the latter and the 20-day moving average would imply upside to 10,850-11,000 and the 50-day moving average. Support is at 10,500-10,350.
The S&P 500 tested an afternoon peak of 3,906 before closing at 3,895 (+2.3%). Key resistance at 3,900 was tripped but held. Continued closes above this level and the 50-day moving average would suggest strength towards 3,950-4,000 and the 200-day moving average. Support is at 3,850-3,800.
The Russell 2000 ended at 1,792 (+2.3%) with the session high reaching 1,795. Lower resistance at 1,775-1,800 and the 20-day moving average were recovered. A close above the latter would indicate a retest towards towards 1,825-1,850 and the 50-day/ 200-day moving averages. Support is at 1,750-1,725. Below is a chart of the IWM.
The Dow settled at 33,630 (+2.1%) following the second half run to 33,710. Key resistance at 33,500 was reclaimed. Continued close above this level would setup a push towards 33,750-34,000. Support is at 33,250-33,000 and the 50-day/ 20-day moving averages.
Volatility Index
The Volatility Index (VIX) was down for the second time in three day with the low tagging 21. Upper support 21.50-21 was breached and held. A drop below the latter would imply a retest to 20-19.50.
Resistance is at 22-22.50. and the 20-day/ 50-day moving averages. The stalemate between the bulls and bears remains in play on the VIX as last week’s peak reached 23.76. While 24 is a key level of resistance, there is wiggle room up to 26 and a level that has been holding since early November. A close above 26 would be very bearish for the market.
The December 2nd low touched 18.95 with the close at 19.06 representing two back-to-back closings below 20 following the December 1st close at 19.84. There were a couple of attempts to crack 20 later in the month but a level that held. For a sustained rally to remain in play, the VIX will likely need a close below 19 with additional weakness towards 18-17.50.
Last January’s mid-month lows tapped 17.36 and 17.45 and when the market peaked. With fourth-quarter earnings season coming into play the rest of the month, there is a good chance a close above 26 or below 19 comes into play.
Market Analysis
The Wilshire 5000 Composite Index (WLSH) rebounded after tagging a high of 38,734. Near-term and lower resistance at 38,500-39,000 was cleared and held. A move above the latter and the 50-day moving average would signal strength to 39,500-40,000 and the 200-day moving average.
Support is at 38,000-37,500.
RSI (relative strength index) is back in an uptrend with key resistance at 50 getting cleared and holding. Continued closes above this level would suggest strength to 55-60 and levels from early December. Support is at 45-40.
Sector
The Industrials Select Sector Spider (XLI) was up for the third time in four days following the trip to $101.19. Prior and lower resistance at $101-$101.50 was tripped but held. A close above the latter would signal additional strength to $102.50-$103 with the December peak at $103.31.
Support is at $99.50-$99.
RSI is in an uptrend with key resistance at 60 holding. A move above this level would suggest upside action towards 65-70 and early December levels. Support is at 55-50.
Market Outlook
The Dow is the first major index to show signs of breaking out of the current 14-session trading ranges. If the other major indexes start to follow, there is a good chance a retest towards the 200-day moving averages for the S&P and the Russell comes back into focus. The Nasdaq has a lot more work to do but could test 11,500 and key resistance from November and December.
If the top of the current trading ranges get stretched but hold this week, the current stalemate could linger into the heart of the fourth-quarter earnings season, or another few weeks. A drop below the bottom of the current trading ranges would mostly likely lead to another round of 52-week lows.
One interesting development has been the action in the S&P VIX Short-Term Futures (VXX) which tagged a fresh 52-week and all-time low of 13.19 on Friday. This is a bullish development for the market as it mirrors the VIX and could make its way down to 12-10. Key resistance is at 15.50-16.
The near-term options for both calls and puts seem reasonable and there could be an opportunity for a trade so stay tuned on that front.
The portfolio is light so we should also have some action in individual stocks using call and put options as early as today, as well.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 3-0 (100%). 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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