MomentumOptions.com Pre-Market Update for 12/18/2023
Small-Caps Tap 52-Week Peak, Fade Afterwards
8:00am (EST)
Video:
Near-term Targets, Bounce off October’s lows, T, TEVA, SNAP, CSCO, TEVA
https://us06web.zoom.us/rec/share/aUFZh7LUIScKM430j9BO4JA0ieFzvCpxu-qheks-18ibfrIEnIw8WBx8DY1Uma3O.wFJ8eT-RZSuwSx4Z
Passcode: AuVmg*1?
Commentary
The stock market was mixed on Friday despite testing fresh 52-week and all-time highs as overbought levels remain in play. The overall weekly gains pushed Wall Street’s winning streak to seven weeks as the rally off the October lows continues.
The Nasdaq finished at 14,813 (+0.4%) after kissing a high of 14,848. New and lower resistance at 14,750-15,000 held for the second-straight session. A move above the latter would imply ongoing strength to 15,150-15,300. Rising support is at 14,650-14,500.
The S&P 500 made a run to 4,725 before ending slightly lower at 4,719 (-0.01%). Fresh and lower resistance at 4,700-4,750 held for the second-straight day. A close above the latter would suggest momentum to 4,800-4,850 with the all-time high at 4,819 set on January 4th, 2022. Support is at 4,650-4,600.
The Dow closed at 37,305 (+0.2%) with the all-time intraday peak hitting 37,347. Undefined and lower resistance at 37,250-37,500 held for the second-straight session. A close above the latter would signal additional upside to 37,750-38,000. Rising support is at 37,000-36,750.
Volatility Index
The Volatility Index (VIX) tapped a low of 12.01 with Tuesday’s 52-week low of 11.81. Upper support at 12-11.75 was challenged and held. Continued closes below the latter would signal weakness to 11.50-11.25. Resistance is at 12.50-13 with stretch up to 14-14.25.
Monday’s earnings announcements:
Before the open: None
After the close: Ark Restaurants (ARKR), HEICO Corporation (HEI), Quipt Home Medical (QIPT)
Economic News
Home Builder Confidence Index – 10:00am
Market Thoughts
Predicting market tops and bottoms are never easy, so they say. Most of the talking heads and slick speaking pros say this because they don’t do the homework. While it can be a tedious task, there are plenty of technical indicators that help in predicting market peaks and valleys.
We have been very detailed in our predictions throughout the year and we have been fortunate enough to mostly thrive with the trend and with great results. We have been spot on in calling the summertime highs, the October lows, the current rebound, and possible top that could be coming into play this month.
Coming into last week our near-term possible market peaks were at: Nasdaq 14,850-15,000; Dow 37,000-37,500; and S&P 4,750-4,800. This week’s highs were at Nasdaq 14,855; Dow 37,347; and S&P 4,738.
The S&P’s all-time high is north of 4,800 as we mentioned earlier while the Nasdaq cleared 16,000 in November 2021. The S&P still has a shot at its all-time high but the Nasdaq might struggle at 15,000 and would still be 1,000 points away.
On that note, the gains off the October lows have been incredible to say the least. The Dow tested a low of 32,327 on October 27th with Friday’s intraday peak giving the blue-chips a return of 16% over the past six weeks. The Nasdaq bottomed out at 12,543 on October 26th and is up 18% on Friday’s close. The S&P has surged 15% from its late October 27th low of 4,103.
As far as the small-caps, we said coming into the week a move above 1,900 would be very bullish for the overall market. The Russell 2000 gapped higher throughout the week with Friday’s 52-week top at 2,009 and Thursday’s high at 2,008. However, the small-caps fell 0.7% after Friday’s peak and closed at 1,985.
The prior high of 2,003 on July 31st formed a double-top from the highs of 2,007 and 2,005 on February 2nd and 3rd. More importantly, we talked about the possibility of a triple-top forming if the small-caps failed to hold the 2,000 level for several sessions this month. We didn’t think it would come, and possibly go, this quickly as the pullback off the high at 2,009 is suggesting a peak after failing to secure 2,000 in back-to-back sessions.
The Russell bottomed at 1,633 on October 27th and zoomed 23% on Friday’s run to 2,009. If there is no recovery of the 2,000 level this week by the small-caps, it would be a bad omen for the overall market.
RSI levels remain ridiculously high and in overbought territory but something we said could continue into month end. RSI (relative strength index) on the Dow closed at 85 with the Nasdaq at 76 and the S&P at 78. Again, the fear of missing out, or the current FOMO rally, could continue the rest of the month and even into January, but at some point, a back-and-fill pattern and new support levels will be defined.
This week is quadruple-witching for the market with Friday’s expiration likely being more volatile than the rest of the week. We could have New Trades as early as today so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 33-10 (77%). 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.
AT&T (T, $16.52, down $0.13)
T January 17 calls (T240119C00017000, $0.26, down $0.04)
Entry Price: $0.15 (12/12/2023)
Exit Target: $0.45
Return: 73%
Stop Target: 20 cents (Stop Limit)
Action: Set an initial Stop Limit at 20 cents to protect profits and to avoid a possible loss.
Upper support at $16.50-$16.25 was tripped but held with the low hitting $16.45. There is risk towards $16-$15.75 on a close below the latter. Resistance is at $16.50-$16.75.
A golden cross has formed with the 50-day moving average closing above the 200-day moving average. This is typically a bullish signal for higher highs and at the least a retest towards $17-$17.25.
Transocean (RIG $6.11, down $0.04)
RIG January 5.50 puts (RIG240119P00005500, $0.15, unchanged)
Entry Price: $0.20 (12/6/2023)
Exit Target: $0.40
Return: -25%
Stop Target: None
Action: Shares traded down to $6.04 with upper support at $6-$5.75 holding. Resistance is at $6.25-$6.50.
