MomentumOptions.com Pre-Market Update for 10/12/2023
Nasdaq Recovers 50-Day Moving Average
8:00am (EST)
Commentary
The stock market was choppy on Wednesday but showed ongoing strength despite stronger-than-expected economic news. Specifically, the producer price index for September rose 2.2% from a year earlier, versus forecasts for a gain of 1.6%.
The gains continued to confirm a near-term bottoming process ahead of the start of the third-quarter earnings season with volatility also simmering. Of course, the bears aren’t quite ready for hibernation as the technical outlook still remains a tad shaky.
The Nasdaq closed at 13,659(+0.7%) with the high at 13,671. Fresh and lower resistance at 13,600-13,750 and the 50-day moving average were cleared and held. A close above the latter would suggest upside towards 13,850-14,000. Rising support is at 13,500-13,350.
The S&P 500 traded up to 4,378 while ending at 4,376 (+0.4%). Lower resistance at 4,350-4,400 was reclaimed. A move above the latter and the 50-day moving average would indicate momentum to 4,450-4,500. Current support is at 4,300-4,250.
The Dow went out at 33,804 (+0.2%) after peaking at 33,882. Lower resistance at 33,750-34,000 was topped and held. A pop above the latter and the 200-day moving average would be a more bullish development with strength to 34,250-34,500. Support is at 33,500-33,250.
Volatility Index
The Volatility Index (VIX) was down for the fifth time in six sessions following the fade to 16.09. Upper support at 16.50-16 was breached and held. A close below the latter and the 50-day moving average would be an ongoing bullish development for the market. Resistance is at 17-17.50 and the 200-day moving average.
Thursday’s earnings announcements:
Before the open: Commercial Metals (CMC), Delta Air Lines (DAL), Fastenal (FAST), Infosys Technologies (INFY), Walgreens Boots Alliance (WBA)
After the close: Comtech Telecommunications (CMTL), (IDT (IDT), SMART Global Holdings (SGH)
Economic news:
Initial Jobless Claims – 8:30am
Consumer Price Index – 8:30am
Market Thoughts
We said the two major charts to focus on coming into this week was the action in the Nasdaq and the VIX. We will start with the Nasdaq as the index cleared and held 13,500 on Tuesday to confirm the breakout we highlighted out of a 12-session range to end last week.
Of course, we also mentioned continued closes above 13,600 and the 50-day moving average were more important and these levels were cleared and held. If the Nasdaq can recover 13,850 ahead of the weekend, this would be an bullish development for Tech and the overall market heading into next week.
As far as the VIX, the retest to 20 and close at 17.70 was a disappointment to open the week but the last two sessions have produced lower lows. If the bulls can get below 15 after Friday’s earnings from the Financial sector, this would also be an ongoing bullish signal for the market.
The next biggest development is this week’s action has pushed the S&P to within spitting distance of recovering its 50-day moving average. While this is good news, the 50-day MA’s for all of the major indexes remain in downtrends.
The RSI (relative strength index) levels for the Nasdaq and S&P have cleared 50 (bullish) and remain in uptrends with the Dow slightly lagging. We mentioned if the Nasdaq could clear and hold 50 to start the week and show strength afterwards, the S&P, and likely the Dow, should follow.
This morning’s economic news could play a major role in determining if the bulls will make it five-straight winning sessions, or if the bears will put a halt to the current momentum. September’s Consumer Price Index (CPI) is expected to show headline inflation coming in at 3.6%, and a slight dip from the 3.7% gain in August.
The news could have a major role in determining if the Federal Reserve will consider another interest rate hike next month. We don’t get too caught up in Fed policy but our guess is there won’t be another hike until December.
On that note, we have updated our current positions so let’s go check the tape.
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.
Ford Motor (F, $12.25, up $0.05)
F November 12 puts (F231103P00012000, $0.37, down $0.05)
Entry Price: $0.50 (10/3/2023)
Exit Target: $1.00
Return: -26%
Stop Target: None
Action: Shares traded up to $12.39 with lower resistance at $12.25-$12.50 getting cleared and holding. Continued closes above the latter and the 50/ 200-day moving averages would be a slightly bullish signal. Support is at $12-$11.75.
Petróleo Brasileiro (PBR, $15.07, down $0.01)
PBR October 16 calls (PBR231020C00016000, $0.07, down $0.05)
Entry Price: $0.35 (9/14/2023)
Exit Target: $0.70
Return: -80%
Stop Target: None
Action: Prior and lower resistance at $15.25-$15.50 easily held with yesterday’s opening high tapping $15.14. A close above the latter could lead to a breakout towards and past $16. New support is at $14.75-$14.50.
We talked about how a close back above the 50-day moving average this week would be a renewed bullish development and we still have time to make a profit on this trade. Our last position in PBR was down 90% before we turned a slight profit with this being a rollover trade. However, a close back below the 50-day moving average will likely force us to exit.
