MomentumOptions.com Pre-Market Update for 10/23/2023
Nasdaq Closes Below 13,000
8:00am (EST)
Commentary
The stock market was weak again on Friday as Treasury yields continued to rise and mixed earnings weighed on sentiment. Specifically, the 10-year Treasury cleared 5% for the first time in 16 years while American Express (AXP) earnings beat expectations, but revenue fell just shy of estimates.
The Nasdaq tested a late day low of 12,977 while ending at 12,983 (-1.5%). Prior and upper support at 13,100-12,950 failed to hold. A move below the latter and the September low at 12,963 would be a bearish development with downside action to 12,850-12,700 and the 200-day moving average. Lowered resistance is at 13,200-13,350.
The S&P 500 closed at 4,224 (-1.3%) after tapping a low of 4,223. Upper support at 4,250-4,200 and the 200-day moving average were breached and failed to hold. A fade below the latter would indicate further weakness towards 4,150-4,100. Lowered resistance is at 4,300-4,350.
The Dow traded down to 33,118 before going out at 33,127 (-0.9%). Near-term and upper support at 33,250-33,000 failed to hold. A close below the latter and the October 6th low at 32,846 would suggest additional downside risk to 32,750-32,500. Resistance is at 33,500-33,750 and the 200-day moving average.
Volatility Index
The Volatility Index (VIX) extended its winning streak to four-straight day with the high hitting 21.83. Lower resistance from May at 21.50-22 was cleared and held. A close above the latter could will likely lead to a quick pop towards 24-24.50. New and rising support is at 20.50-20.
Monday’s earnings announcements:
Before the open: Acme United (ACU), Bank of Hawaii (BOH), Dynex Capital (DX), Royal Philips (PHG)
After the close: Aaron’s (AAN), Cleveland-Cliffs (CLF), Cadence Design Systems (CDNS), HealthStream (HSTM), Logitech International (LOGI), TrueBlue (TBI)
Economic News
None Scheduled
Market Thoughts
The bears pushed, and cracked, key support levels we listed on Thursday morning and to watch into Friday’s close: Nasdaq 13,000; S&P 4,225; and Dow 33,000. The blue-chips did manage to hold 33,000 but a death-cross is quickly forming with the 50-day moving average on track to close below the 200-day moving average.
This technical setup typically confirms lower lows down the road. A death-cross is also in play for the S&P and the Nasdaq but the pace doesn’t appear as rapid as the Dow’s.
We listed the monthly lows for the Nasdaq and the Dow earlier with the S&P’s October 3rd low at 4,216. It appears the bears could crack these levels as early as today, to get May support levels in play, but the bulls could hold like they did earlier this month.
The one factor in the bulls favor is that RSI (relative strength index) levels are in the mid-30’s and are close to being at oversold conditions. The Nasdaq and the S&P held 30 in late September and early October but the Dow’s RSI dipped into the high 20’s. These levels also held on the March lows.
We mentioned the most important chart into last Friday’s close was the action in the VIX. The bulls pushed a fresh monthly high after closing at 21.40 on Thursday. The close above 20 was the first since the May 24th session at 20.03.
We predicted upside pressure towards 21-21.50 for the VIX with Friday’s close above the latter getting March highs back in play. While there is a chance for higher highs, RSI flattened out at 65 and fell shy of 70. This typically indicates overbought conditions as the VIX also held 70 in late September and early October. The last time the VIX closed above 70 was in September 2022. The VIX will need to hold 22-22.50 to start the week to avoid what could become extreme selling pressure.
With the VIX being overbought, and the major indexes nearing oversold levels, a rebound appears to be likely over the near-term. This is not a given, of course, but 3Q Tech earnings will start to roll in this week and would provide the perfect catalyst for a bounce off key support levels.
Now, if earnings come in below expectations, a much deeper selloff could come into play. We listed much lower downside targets earlier this month if key support levels failed to hold but let’s wait to review them on Thursday, or next week, after the fireworks conclude.
We have been pinpoint accurate in predicting the market trends throughout the year and have taken advantage of bullish and bearish setups. We are once again at a major inflection point so stay locked-and-loaded for New Trades this week.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 23-9 (72%). 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.
Cisco Systems (CSCO, $52.93, down $0.39)
CSCO November 53 puts (CSCO231110P00053000, $1.00, up $0.15)
Entry Price: $0.60 (10/18/2023)
Exit Target: $1.20
Return: 67%
Stop Target: 80 cents (Stop Limit)
Action: Set an initial Stop Limit at 80 cents to start protecting profits and to avoid a loss.
Shares kissed a low of $52.80 with upper support at $53-$52.50 failing to hold. We would love to see a drop below $52 and the bottom of a month long trading range. Resistance is at $53.50-$54.
Ford Motor (F, $11.64, up $0.11)
F November 12 puts (F231103P00012000, $0.70, down $0.05)
Entry Price: $0.50 (10/3/2023)
Exit Target: $1.00
Return: 40%
Stop Target: None
Action: Key resistance (and prior support) at $11.75 was cleared but held with the peak at $11.76. Support is at $11.50 with backup at $11.25-$11.
