MomentumOptions.com Pre-Market Update for 1/11/2024
Bulls Once Again Pushing Key Resistance
8:00am (EST)
Commentary
The stock market showed ongoing Wednesday with the major indexes testing key resistance levels ahead of Thursday morning’s CPI report. A breakout, or pullback, from current levels could be a good clue on how Friday’s action unfolds with the Financial companies reporting 4Q earnings.
The Nasdaq traded up to 14,998 before settling at 14,969 (+0.8%). Prior and lower resistance from late December at 14,900-15,050 was reclaimed. A close above the latter would imply upside towards 15,150-15,300 with the former representing the December 28th 52-week peak. Rising support is at 14,800-14,650.
The S&P 500 closed at 4,783 (+0.2%) after tagging a high of 4,790. Key resistance at 4,800 was approached and held. Continued closes above this level and the all-time high at 4,819 from January 4th 2022 would indicate a possible breakout to 4,850-4,900. Support is at 4,750-4,700.
The Dow peaked at 37,740 while finishing at 37,695 (+0.5%). Key resistance at 37,750 was challenged and held. A close above this level and last week’s all-time peak at 37,790 gets 38,000-38,250 back in play. Support is at 37,500-37,250.
Volatility Index
The Volatility Index (VIX) bottomed at 12.67 with key support at 12.50 holding. A close below this level would suggest a retest to 12-11.75 and possible fresh 52-week lows. This would be a bullish signal for the market. Resistance is at 13-13.50.
Thursday’s earnings announcements:
Before the open: Infosys Technologies (INFY), Northern Technologies International (NTIC), Urban One (UONE)
After the close: Concrete Pumping (BBCP), Urban One (UONEK)
Economic news:
Initial Jobless Claims – 8:30am
Consumer Price Index – 8:30am
Market Thoughts
The bulls are regaining momentum ahead of this morning’s CPI and Friday’s start of the 4Q earnings parade with the action likely getting the next near-term trend in focus. While we did predict last week’s market pause, we also said another round of 52-week and all-time highs can’t be ignored.
As a reminder, BlackRock (BLK), Citigroup (C), JPMorgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) will announce numbers ahead of Friday’s open. After Wednesday’s close, Citigroup stated that in the fourth quarter, pretax results were impacted by increases in transfer risk associated with exposures outside the United States.
Specifically, Citi recorded a $1.3 billion reserve build related to the cross-border and cross-currency exposures in Argentina. We aren’t, or weren’t, expecting the Financial’s to led the market’s next leg higher, or lower, but this wasn’t a good omen heading into Friday’s and next week’s flood of earnings from the sector.
If the market can make new highs on this morning’s economic news, perhaps, Friday will be a retest to fresh support (now resistance) if there is weakness. Key support levels on the S&P at 4,700 and the Dow at 37,000 held last week and so far this week. This has been a good signal another round of new highs could be coming.
The Nasdaq regained 14,800 to start the week and is also knocking on fresh 52-week highs. The Russell closed at 1,970 but needs to recover the 2,000 level to regain a bullish thesis. We stated a close below 1,950 and the 50-day moving average would be a bearish development for the small-caps, and possibly the overall market, but this level held on Monday’s open before the intraday surge to 1,989.
The VIX closed back below 13.50 on Friday and held this level on Monday, as well. We talked about continued closes back below 12.50 this week would be a bullish case for the market so let’s see where we stand after Friday’s closing bell.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 1-0 (100%). 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.
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AT&T (T, $16.87, down $0.08)
T February 18 calls (T240216C00018000, $0.17, down $0.01)
Entry Price: $0.26 (1/5/2024)
Exit Target: $0.75
Return: -35%
Stop Target: None
Action: We mentioned shares could pullback this week following the dividend payment but we were able to cash out the T February 17 calls for an 80% win on Monday. This follows a 150% return we banked on the T January 16 calls and a 33% profit on the T January 17 calls to close out 2023.
Fresh and upper support at $16.75-$16.50 was challenged and held on the fade to $16.76. A close below the latter would setup a further backtest to $16.25-$16 and the 50-day moving average. Resistance is at $17-$17.25.
The trade is only down 9 cents and we are holding the position open thru earnings due out later this month.
ProShares UltraPro Short QQQ (SQQQ, $13.54, down $0.28)
SQQQ February 16 calls (SQQQ240216C00016000, $0.28, down $0.05)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: -53%
Stop Target: None
Action: Key support at $13.50 was breached but held with the intraday low at $13.44. Resistance is at $13.75-$14.
We wanted downside insurance as we predicted a market top coming into the New Year. The bulls are still holding key support levels so the trade is down. February is typically a bearish month for the market so we don’t mind holding this trade into mid-February.
