Pre-Market Update for 7/17/2023

Dow Holds Gains Following Intraday Reversal

8:00am (EST)


The stock market was mostly lower on Friday despite a positive start to the second-quarter earnings season and better-than-expected economic news. The Financial sector showed opening strength as the Big Banks reported upbeat numbers. However, most of the well-known banking stocks closed well off their highs, and some lower, on profit taking ahead of the weekend.

Meanwhile, consumer confidence on the economy rose to the highest level since September 2021 after the University of Michigan Consumer Sentiment Index came in at 72.6. This was well above expectations for a print of 65.5 and helped keep the overall market losses in check.

The Nasdaq traded to another 52-week peak of 14,232 before closing slightly lower at 14,113 (-0.2%). Fresh and lower resistance at 14,200-14,350 was cleared but held. A move above the latter would suggest ongoing upside towards 14,500-14,650. Support is at 14,000-13,850.

The S&P 500 ended at 4,505 (-0.1%) with the intraday 52-week high hitting 4,527. August 2022 resistance at 4,550 was challenged and held. Continued closes above this level would be a bullish signal for a further push towards 4,600-4,650. Support is at 4,450-4,400.

The Dow traded up to 34,592 while ending at 34,509 (+0.3%). Prior and lower resistance at 34,500-34,750 was cleared and held. A close above the latter and last December’s high at 34,712 would imply a breakout towards 35,000-35,250. Support remains at 34,250-34,000.

Volatility Index

The Volatility Index (VIX) was down for the third time in four sessions with the low at 13.22. Upper support at 13.25-13 was tripped but held. A drop below the latter would set up another retest towards the 12.75 area. Resistance is at 13.50-13.75.

Monday’s earnings announcements:

Before the open: GreenPower Motor Company (GP), Guaranty Bancshares (GNTY)

After the close: CrossFirst Bankshares (CFB), Equity LifeStyle Properties (ELS), FB Financial (FBK), Home Bancorp (HBCP)

Economic News

New York Empire State Manufacturing Survey – 8:30am

Market Thoughts

For the week, the Nasdaq jumped 3.3%; the S&P 500 rose 2.4%; and the Dow was up 2.3%. Energy was the weakest sector after sinking 2.6% for the week while Healthcare rallied 1.5%.

Some of Friday’s weakness may have been attributed to this week’s upcoming “special” rebalance on the Nasdaq 100. We have been harping on how artificial intelligence (AI) has driven the market higher, especially Tech, over the past few months which has caused the index to become top heavy.

Specifically, Amazon (AMZN), Apple (AAPL), Alphabet (GOOG), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA), also known on Wall Street as the Magnificent Seven, have zoomed this year on AI technology. Together, they account for over 52% of the index.

The Special Rebalance will not result in the removal or addition of any stocks, just less exposure for the aforementioned stocks. The “smart” money might be preparing for a pullback this week but price action will determine this outcome.

Earnings are light today but we will get another round of numbers from the Financial sector that could help influence the near-term trend. Bank of America (BAC), Charles Schwab (SCHW), Morgan Stanley (MS), and PNC Financial Services (PNC) are on deck and are expected to report solid quarters.

All of the aforementioned stocks are well below their 200-day moving averages, excluding Morgan Stanley (MS) which has been flirting with this level over the past three sessions.

The company has topped expectations by seven cents, twice, over the past two quarters but missed the prior two quarters by two and 14 cents. How shares react following the earnings news will likely sway Tuesday’s action.

We could also see some choppiness afterwards until the back half of the week with Tesla (TSLA) and Netflix (NFLX) reporting numbers after Wednesday’s closing bell. Both are heavily weighted in the major indexes and there is no doubt Thursday’s action will have more of a major impact on the overall market than the Financial sector’s earnings.

Friday’s action was slightly bearish and futures were mixed last night and ahead of this morning’s opening bell. We will likely have new trades this week so stay locked-and-loaded.

Momentum Options Play List

Closed Momentum Options Trades for 2023: 16-8 (67%). 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.

Iovance Biotherapeutics (IOVA, $7.76, up $0.08)

IOVA December 12.50 calls (IOVA231215C00012500, $0.70, unchanged)

Entry Price: $0.80 (7/10/2023)
Exit Target: $1.60
Return: -13%
Stop Target: None

Action: Shares traded down to $7.43 with upper support at $7.50-$7.25 getting breached but holding. Resistance is at $8-$8.25 and the 50-day moving average.