MomentumOptions.com Pre-Market Update for 10/2/2023
Bulls Trying to Establish a Near-Term Bottom
8:00am (EST)
Commentary
The stock market was mixed on Friday despite mostly upbeat economic news with Tech showing strength while the broader market and the blue-chips pulled back. The U.S. personal income report was slightly stronger-than-expected, following a 0.4% rise for August.
Consumer sentiment rose to 68.1 in the September update, up from the 67.7 preliminary print. Meanwhile, the final Michigan sentiment report revealed an upwardly revised headline drop to 68.1 from 69.5 in August.
The Nasdaq tested a high of 13,382 while ending at 13,219 (+0.1%). Lower resistance at 13,350-13,500 was cleared but held. A pop above the latter would suggest a retest towards 13,600-13,750 and the 50-day moving average. Support is at 13,000-12,850.
The S&P 500 settled at 4,288 (-0.3%) despite tagging a morning high of 4,333. Lower resistance at 4,300-4,350 was topped but held. A close above the latter would imply further strength to 4,400-4,450 and the 50-day moving average. Shaky support is at 4250-4,200 and the 200-day moving average.
The Dow traded to an intraday high of 33,893 before ending lower at 33,507 (-0.5%). Current and lower resistance at 33,750-34,000 and the 200-day moving average were breached but levels that held. A move above the latter would be a more bullish development for a run towards 34,250-34,500. Support is at 33,500-33,250.
Volatility Index
The Volatility Index (VIX) was up for the first time in three sessions but held its 200-day moving average after tapping a low of 15.83. Prior and upper support at 16-15.50 was tripped but held. A close below 15 and the 50-day moving average would be a more bullish setup for the market with weakness towards 14.50-14. Resistance is at 18-18.50.
Monday’s earnings announcements:
Before the open: Antelope Enterprise Holdings (AEHL)
After the close: Upexi (UPXI)
Economic News
Construction Spending – 10:00am
ISM Manufacturing Index – 10:00am
Market Thoughts
For the third quarter, the Nasdaq sank 4.1%; the S&P 500 tanked 3.6%; and the Dow dropped 2.8%. Much of this occurred with last week’s pullback so we thought we would highlight the impact.
Of course, we talked about Wednesday’s mid-week reversal (and one we predicted) off the fresh multi-month lows that served as prior support from early June for the major indexes. Thursday’s follow through and Friday’s higher highs were bullish with the afternoon pullback to end the week likely coming from nervousness over a possible government shutdown.
That outcome was avoided as the Senate voted to pass a continuing resolution late Saturday night that was signed into law by the President.
The bill allows the government to stay open for 45 days, giving both sides more time to finish their funding proposals.
The auto sector will remain in focus this week as the United Auto Workers (UAW) expanded its strike on Friday. The UAW added bodies to the strikes at Ford (F) and General Motors (GM) but not for Stellantis (STLA) as negotiations improved over the past week.
The charts for F and GM have remained bearish with both stocks in mini-trading ranges. A death cross has formed in GM with the 50-day moving average falling below the 200-day moving average.
This setup is close to happening with F.
Meanwhile, STLA is holding its 50-day moving average and is within striking distance of its 52-week peak from late July at $20.71.
There could be bearish trade setups if F falls below $12.25-$12 and GM slips below $32. If STLA makes a run past $20.75, shares could be setting up for a possible run past $24 and all-time highs.
The auto companies are also expected to report quarterly deliveries during the upcoming week. This could also impact share prices, especially Tesla’s (TSLA), as the company is expected to report deliveries of 456,000. This would be slightly below last quarter’s print at 466,000.
While there are no earnings for today, McCormick (MKC) and Cal-Maine Foods (CALM) will announce numbers on Tuesday. There are a few other notable companies reporting later in the week, and next, before the “official” start of the 3Q earnings season.
As far as key resistance levels to watch this week: Dow 34,000 and S&P 4,350. These were prior crucial support levels we mentioned needed to hold to avoid a possible 10% pullback this month. The Nasdaq recovered 13,200 on Tuesday’s strength with this level holding into Friday’s close.
We will have more of a technical analysis for the market in Thursday’s update with our bi-weekly video. We were going to do it tonight but we wanted to see how the first few days of the new month unfold. Additionally, we will also have possible setups to review as we look for new trades to add to the portfolio.
As of this writing, futures are showing a strong open on Monday but things can change before the official bell rings. If the bulls can top Friday’s highs to start the week, while the VIX recovers 15, a bounce back week could occur.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 22-9 (71%). 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 we list one. We will send out a “Profit Alert” or “New Trade” if we 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.
Petróleo Brasileiro (PBR, $14.99, up $0.15)
PBR October 16 calls (PBR231020C00016000, $0.14, up $0.02)
Entry Price: $0.35 (9/14/2023)
Exit Target: $0.70
Return: -60%
Stop Target: None
Action: Friday’s peak reached $15.14 key resistance at $15 getting cleared but holding. Continued closes above $15.50 would be a more bullish development with breakout potential towards $16.50-$17. Support remains at $14.75-$14.50.
Volume in these options was heavy on Friday with over 20,000 contracts exchanging hands. This is typically a bullish signal for higher highs.
