MomentumOptions.com Pre-Market Update for 2/13/2023
VIX Gets Stretched, Bears Get Weekly Win
8:00am (EST)
The stock market was mostly higher on Friday despite Tech showing continued weakness for the third-straight session. The rebound wasn’t enough to offset the weekly losses as the bears got a clean sweep on all of the major indexes for the weekly win.
The Dow closed at 33,869 (+0.5%) with the high at 33,897. Current and lower resistance at 33,750-34,000 was recovered. A pop above the latter would imply strength to 34,250-34,500 with the January 13th peak at 34,342.
The S&P 500 tagged an intraday high of 4,094 while settling at 4,090 (+0.2%). Near-term and key resistance at 4,100 was challenged and held. A move back above this level suggest another run towards 4,150-4,200.
The Russell 2000 tested an afternoon peak of 1,920 before finishing at 1,918 (+0.2%). New and lower resistance at 1,925-1,950 was approached and held. A close above the latter would indicate further upside to 1,975-2,000. Below is a chart of the IWM.
The Nasdaq ended at 11,718 (-0.6%) after trading down to 11,630. Fresh and upper support at 11,750-11,650 failed to hold. A drop below the latter would signal ongoing weakness towards 11,500-11,350 and the 200-day moving average.
Volatility Index
The Volatility Index (VIX) had its two-session winning streak snapped despite tapping a high of 21.94. Key resistance at 22, as well as the 50-day moving average, were breached but levels that held. A close above 22 would be a bearish development for the market with additional strength towards 23.50-24.
Rising support is at 20-19.50.
Market Thoughts
The major indexes did test lower intraday lows on Friday with the S&P, Russell, and the Nasdaq remaining within their yearlong uptrend channels. The Dow has lagged the rest of the action and continues to struggle with key resistance at 34,000.
Let’s start with the Dow, first. The index is currently in a 12-session trading range and has been holding its 50-day moving average over this time frame. I mentioned coming into last week backup support is at 33,000, and a level that has been holding since mid-December, could come into play on a close below 33,500.
The S&P has downside risk towards 4,000-3,950 and the major moving averages that could come quickly if 4,050 cracks this week. The golden cross formation with the 50-day moving average clearing and holding the 200-day moving average remains slightly bullish.
The Nasdaq, however, is on the verge of falling out of its uptrend channel after getting stretched on Friday. I highlighted 11,500 as crucial support with stretch towards the 200-day moving average, if breached.
For the second-straight week, I want to reiterate, a close below 4,000 on the S&P; 33,000 on the Dow; and 11,500 on the Nasdaq would be bearish developments for the market and suggest near-term tops.
The RSI levels for the major indexes are north of 50 with the Nasdaq the highest at 56. The index still appears like it could test this level with the others having held 50 on Friday’s rebound. Obviously, a close across the board below 50 would likely confirm near-term tops for the overall market, as well.
Last week’s break above the downtrend line on the VIX, and back-to-back closes above 20 coming into this week, remain bearish trinkets for the market. I’m still targeting a VXX trade to play volatility but wanted to see how today’s action unfolds before taking action.
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.
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 Otherwise, follow instructions at all times in the updates on Monday’s and Thursday’s along with the Text Alerts throughout the week.
Barrick Gold (GOLD, $17.93, up $0.12)
GOLD March 21 calls (GOLD230317C00021000, $0.15, unchanged)
Entry Price: $0.47 (2/1/2023)
Exit Target: $1.00
Return: -67%
Stop Target: None
Action: We will likely know the fate of this trade on Wednesday with earnings due out. The premium took a big hit on last week’s pullback.
New and lower resistance at $18-$18.25 and the 50-day moving average were cleared but held on the rebound to $18.05. Support at $17.75-$17.50.
