MomentumOptions.com Pre-Market Update for 11/6/2023
Bulls Recover 50-Day Moving Averages
8:00am (EST)
Video: The importance of last week’s v-shape recovery (if it holds), volatility review. Stocks: BITO, PBR, FL, HOOD, BAC, SNAP, CSCO…
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Commentary
The stock market stayed hot for the fifth-straight session, despite a weaker-than-expected jobs report, as Friday’s gains capped off the best week of the year for the major indexes. The economy added just 150,000 jobs last month and well below forecasts for a print of 170,000.
The unemployment rate came in at 3.9%, versus expectations for an unchanged reading of 3.8%. Average hourly earnings also missed forecasts, rising 0.2% last month, and below the penciled-in 0.3% increase. The unexpected results put Wall Street in a buying mood as the chances of a December rate hike may have gotten punted into January.
The Nasdaq finished at 13,478 (+1.4%) with high hitting 13,520. Prior and lower resistance at 13,500-13,650 and the 50-day moving average were recovered. A pop above the latter would suggest further momentum towards 13,750-13,900. Fresh support is at 13,350-13,200.
The S&P 500 tagged a high of 4,373 before going out at 4,358 (+0.9%). Key resistance at 4,350 and the 50-day moving average were cleared and held. Continued closes above these levels would imply upside to 4,400-4,450. Rising support is at 4,350-4,300.
The Dow settled at 34,061 (+0.7%) after trading to an intraday peak of 34,163. Key resistance at 34,000 and the 200-day/ 50-day moving averages were reclaimed. Continued closes above these levels keeps strength towards 34,250-34,500 in play. New support is at 33,750-33,500.
Volatility Index
The Volatility Index (VIX) was down for the fifth-straight session after closing on the session low of 14.91. Mid-September and upper support at 15-14.50 was breached and held. A drop below the latter would signal a further slide towards 13.50-13. Lowered resistance is at 16-16.50.
Monday’s earnings announcements:
Before the open: Air Lease (AL), Berkshire Hathaway (BRK.B), Rand Capital (RAND), TreeHouse Foods (THS)
After the close: Diamondback Energy (FANG), FibroGen (FGEN), Goodyear Tire & Rubber (GT), Matterport (MTTR), Medifast (MED), RingCentral (RNG), TripAdvisor (TRIP),
Economic News
None Scheduled
Market Thoughts
For the week, the Nasdaq surged 6.6%; the S&P 500 soared 5.9%; and the Dow jumped 5.1%. Again, the best week of the year. Real Estate and Financials were the strongest sectors after skyrocketing 8.5% and 7.4%, respectively. There were no laggards.
It is rare the market bounces this high in a week and the sharp, v-shape recovery off the prior week lows dramatically improved the technical outlook for the major indexes. To start, the 50-day moving averages were all on track to fall below the 200-day moving averages and form death crosses. This typically confirms lower lows in a stock, or an index, once complete.
The 50-day moving averages have now flattened out with the major indexes recovery these levels on Friday. Going forward, it will be important for the bulls to show follow thru, not only for the upcoming week, but for the month as well. If not, the bearish technical setups we just mentioned could return.
The 50-day moving average on the VIX has reversed course and is showing signs of rolling over. It was on pace to clear the 200-day moving average and form a golden cross. This is typically a bullish technical setup for higher highs.
The close below 15 on the VIX was a major deal as we were only expecting continued closes below 17.50 coming into the week. For new subscribers, a lower VIX is good for the market while a higher trending VIX indicates selling pressure.
We mentioned Apple’s (AAPL) earnings could mark a near-term bottom for the market, and follows our call back in late July/ early August that Apple’s results would coincide with a market top. Although shares pulled back on Friday despite an earnings beat, they still had a great week.
As far as the RSI (relative strength index) levels for the major indexes, they bounced off oversold levels at 30 to close just below 60 across the board. We wouldn’t be surprised if RSI levels test 50 on some weakness this week before eventually making another run towards 70.
There are still a number of key earnings reports due out this month but the peak of the 3Q season is now behind us. The biggest impact on the market will be Nvidia’s results but they aren’t due out until November 21st. Shares held solid support at $400 last week before recovering $450 and the 50-day moving average on Friday.
The chart shows the all-time high north of $502 that was tapped in mid-August following its last earnings update. Continued strength towards the $475 area could come into play over the near-term with the possibility of a double-digit percentage move once Nvidia’s results are out.
Calling last week’s possible market bottom was somewhat easy as the technical setup favored the bulls for a rebound. Again, we were surprised by the magnitude of the rally but we also mentioned November is typically a bullish month for the market.
The action has setup a number of trading opportunities for us to take advantage of as we look to close out a strong year over the next 4-6 weeks. We will likely be taking bullish positions but we still have bearish setups on our Watch Lists, as well.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 27-9 (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 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, $15.68, unchanged)
PBR December 16 calls (PBR231215C00016000, $0.45, unchanged)
Entry Price: $0.40 (11/2/2023)
Exit Target: $0.80
Return: 13%
Stop Target: None
Action: Shares made a run $15.87 with lower resistance at $15.75-$16 getting cleared but holding. Support is at $15.50-$15.25 followed by $15 and the 50-day moving average.
Snap (SNAP, $10.72, up $0.29)
SNAP December 11 calls (SNAP231215C00011000, $0.58, up $0.09)
Entry Price: $0.35 (10/31/2023)
Exit Target: $0.70, raise to $1.05
Return: 66%
Stop Target: 42 cents (Stop Limit)
Action: Raise the Exit Target from 70 cents to $1.05. Set a Stop Limit at 42 cents to start protecting profits and to avoid a loss.
Friday’s peak reached $10.91 with lower resistance at $10.75-$11 getting topped but holding. Rising support is at $10.50-$10.25 and the 200-day moving average.
