MomentumOptions.com Pre-Market Update for 1/10/2023

S&P/ Russell Unable to Hold 50-Day Moving Averages

8:00am (EST)

The stock market showed continued strength on Monday with the broader market and the small-caps clearing, but unable to hold, their 50-day moving averages. The pullback off the highs into the closing bell was a slight disappointment and keeps the current trading ranges from mid-December in play.

The Nasdaq traded to a midday high of 10,807 before settling at 10,635 (+0.6%). Prior and lower resistance at 10,750-10,900 and the 20-day moving average were cleared but held. A move above the latter and the 50-day moving average would suggest ongoing momentum towards 11,000-11,150. Fresh support is at 10,500-10,350.

The Russell 2000 made a run to 1,817 while closing at 1,795 (+0.2%). Lower resistance at 1,800-1,825 and the 50-day moving average were topped but held. A close above the latter and the 200-day moving average would indicate a retest to 1,850-1,875. New support is at 1,775-1,750. Below is a chart of the IWM. 

The S&P 500 ended slightly lower at 3,892 (-0.1%) despite tagging an intraday peak of 3,950. Mid-December and lower resistance at 3,950-4,000 was kissed but held. A close above the latter and the 200-day moving average would be a more bullish development for additional upside towards 4,050-4,100. Support is at 3,850-3,800.

The Dow tagged a high of 33,935 while finishing at 33,517 (-0.3%). Key resistance at 34,000 was challenged but held. Continued closes above this level would setup a push towards 34,250-34,500 with the December peak at 34,712. Support is at 33,250-33,000.

Volatility Index

The Volatility Index (VIX) was slightly higher for the second time in three sessions after trading up to 21.98. Lower resistance at 22-22.50 was challenged and held into the closing bell. A pop above the latter and the 50-day moving average would signal upside to 23.50-24.

Support is at 21-20.50.

Market Analysis

The Invesco QQQ Trust (QQQ) was up for the second-straight session after trading to a high of $275.29. Prior and lower resistance at $275-$275.50 was cleared but held. A pop above the latter would imply strength towards $276.50-$277 and the 50-day moving average.

Support is at $270-$269.50.

RSI (relative strength indicator) is showing signs of leveling off with key resistance at 50 holding. Continued closes above this level would suggest upside to 55-60 and levels from early December. Support is at 45-40.

Sector

The Real Estate Select Sector Spider (XLRE) flipped-flopped for the third-straight session after tapping an afternoon low of $37.73. Upper support at $37.75-$37.50 was breached but held. A close below the latter and the 20-day/ 50-day moving averages would indicate weakness towards $37.25-$37.

Resistance is at $38.25-$38.50.

RSI has flatlined with key support at 50 holding. A move below this level would imply downside action towards 45-40 and levels from late December. Resistance is at 55-60.

Market Outlook

The pullback off the midday highs and lower closes on the Dow and S&P 500 was a bummer for the bulls and keeps the S&P in a 15-session trading range. The higher close on the VIX was a neutral reading as key resistance levels held.

We added a fresh position yesterday and there are a couple more bullish trades I like if the market can show continued strength this week. If I take action on another new trade today, I will send out a Text Alert.

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CSX (CSX, $32.14, down $0.06)

CSX February 33 calls (CSX230203C00033000, $0.70, unchanged)

Entry Price: $0.75 (1/9/2023)
Exit Target: $1.50
Return: -8% 
Stop Target: None

Action: Shares tested a high of $32.63 before ending slightly in the red. Lower resistance from mid-December at $32.50-$32.75 was cleared but held. Support is at $32-$31.75.

The chart looks very bullish with the 50-day moving average on track to clear the 200-day moving average. This would form a golden cross and typically leads to higher highs. A close above $33 and the December peak at $33.33 would be a bullish signal for a run towards $34-$34.50 with the August high at $34.71.