Pre-Market Update for 2/6/2023

Jobs Report Surprises to the Upside

8:00am (EST)

The stock market pulled back on Friday after a much stronger-than-anticipated jobs report kept Wall Street’s focus on the Fed. Non-farm payrolls checked in at 517,000 versus forecasts for a print of 188,000 with the unemployment rate falling to 3.4%, and a 54-year low.

The Nasdaq went out at 12,006 (-1.6%) with the intraday low touching 11,946. New and upper support at 12,000-11,850 was breached but held. A close below the latter would suggest weakness to 11,750-11,600.

The S&P 500 bottomed out at 4,123 before ending at 4,136 (-1%). Upper support at 4,150-4,100 failed to hold. A move below the latter would indicate a further backtest towards 4,050-4,000.

The Russell 2000 settled at 1,985 (-0.8%) with the session low hitting 1,976. Fresh and upper support at 1,975-1,950 was breached but held. A slide below the latter would be a slightly bearish development with weakness towards 1,925-1,900. Below is a chart of the IWM.

The Dow sank to an opening low of 33,813 while closing at 33,926 (-0.4%). Current and upper support at 34,000-33,750 failed to hold. A drop below the latter and the 50-day moving average would imply a retest towards 33,500-33,250.

Volatility Index

The Volatility Index (VIX) was down for the ninth time in 11 sessions with the low at 17.93. Key support at 18 was breached but held. Continued closes below this level keeps weakness to 17-16.50 in focus.

Resistance is at 19-19.50.

Market Thoughts

A golden cross has officially formed in the S&P 500 and follows the same technical setup that confirmed higher highs for the Russell 2000 last month. The Dow formed a golden cross in December.

The 50-day moving average on the Nasdaq is starting to curl higher and could clear its 200-day moving average this month, or in March, to form a golden cross, as well.

The RSI (relative strength index) levels for the major indexes were pushing 70 and above following Thursday’s run to early September and late August resistance levels. While there was a chance for a run towards 80, Friday’s pullback off overbought levels was nearly a given following the weak Tech earnings after Thursday’s closing bell.

Fourth-quarter earnings will reach its crescendo this week and will have less of an impact on the market as we get more into February and March. With the Fed out of the way, the market might take a breather following January’s stellar gains.

The first warning sign of a possible market top will be a close back above 20 on the VIX. Continued closes back above 21-21.50 would likely suggest a near-term market top.

Momentum Options Play List

Closed Momentum Options Trades for 2023: 3-1 (75%). 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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Barrick Gold (GOLD, $18.32, down $1.08)

GOLD March 21 calls (GOLD230317C00021000, $0.15, down $0.15)

Entry Price: $0.47 (2/1/2023)
Exit Target: $1.00
Return: -67%
Stop Target: None

Action: Friday’s low kissed $18.20 with new and upper support at $18.25-$18 getting busted but holding. Resistance is at $18.75-$19.

There was a nasty pullback in Gold as the yellow metal fell $54 and back below $1,900 an ounce on Friday. This likely accounted for the pullback in the stock. Earnings are due out February 15th.