MomentumOptions.com Pre-Market Update for 1/26/2023
Bulls Battle Back From Opening Losses
8:00am (EST)
The stock market was mixed on Wednesday following disappointing earnings from Microsoft (MSFT). The major indexes made a nice recovery off the opening lows with three of the four making it into positive territory late in the day. Volatility was a little heightened but held key resistance at the 20 level before finishing slightly lower.
The Nasdaq settled at 11,313 (-0.2%) with the low at 11,069. Current and upper support at 11,150-11,000 was tripped but held. A close below the latter and the 50-day moving average would suggest a fade to 10,900-10,750.
The S&P 500 closed at 4,016 (-0.02%) after trading down to 3,949. Upper support at 3,950-3,900 and the 200-day moving average were tripped but levels that held. A drop below the latter and the 50-day moving average would imply a retest towards 3,850-3,800 and the previous trading range.
The Russell 2000 went out on the session peak at 1,890 (+0.3%). Key resistance at 1,900 was challenged and held. A close above this level and the monthly peak at 1,903 would signal further strength to 1,925-1,950. Below is a chart of the IWM.
The Dow ended at 33,743 (+0.03%) after tapping an afternoon high of 33,773. Lower resistance at 33,750-34,000 was topped but held. A move above the latter would indicate strength to 34,250-34,500.
Volatility Index
The Volatility Index (VIX) extended its losing streak to four-straight sessions after tapping an intraday low of 18.99. Key support at 19 was breached but held. Continued closes below this level would be a renewed bullish development for the market with weakness towards 18.50-18 and the mid-month low at 18.01.
Resistance is at 20.50-21.
Market Thoughts
This week’s action has produced a mini-trading range that could last into next week and when a bevy of major Tech companies will be reporting. There is also a Fed update so volatility could become a little more heightened.
The VIX has fallen four-straight sessions while holding 20 on the intraday highs north of this level. The index is still signaling possible higher market highs. However, like we mentioned last week, there needs to be continued closes below 18 to confirm a test towards the December peaks for the major indexes
A close back above 21.50-22 and the 50-day moving average on the VIX would be a slightly bearish development for the market. While a bottoming process is always hard to predict, the VXX, which is a way to play volatility, tested all-time lows of 11.57 and 11.56 the past two sessions. There is a chance the 10 area comes into play but a close above 12.50-13 would also be a possible indicator the major indexes could be starting to peak.
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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CSX (CSX, $31.05, down $0.81)
CSX February 33 calls (CSX230203C00033000, $0.20, down $0.10)
Entry Price: $0.75 (1/9/2023)
Exit Target: $1.50
Return: -73%
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
The company topped earnings by three cents after Wednesday’s closing bell with revenue also above estimates. This may or may not be enough for a rebound rally on Thursday as shares were down 2% in after-hours and below $31.
