MomentumOptions.com Pre-Market Update for 1/15/2024
Bulls Keep Fresh Highs in Focus
8:00am (EST)
Commentary
The stock market showed some opening and intraday strength on Friday despite mixed earnings from the Financial sector as the Dow and S&P recorded fresh all-time and 52-week peaks. The weakness afterwards was likely due to geopolitical tensions as traders took some risk off the table ahead of a three-day weekend.
The Nasdaq closed at 14,972 (+0.02%) after kissing a morning high of 15,047. Near-term and lower resistance at 15,000-15,150 was cleared but held. A close above the latter (and the late December 52-week high) would indicate momentum to 15,250-15,400. Key support is at 14,800.
The S&P 500 traded to a high of 4,802 before ending at 4,783 (+0.1%). Key resistance at 4,800 was topped but held. Continued closes above this level and the all-time high at 4,819 from early January 2022 would be a bullish development for a run towards 4,850-4,900. Support remains at 4,750-4,700.
The Dow settled lower at 37,592 (-0.3%) with the first half and lifetime high hitting 37,825. Key resistance at 37,750 was cleared but held. Continued closes above this level would suggest upside to 38,000-38,250. Support is at 37,500-37,250.
Volatility Index
The Volatility Index (VIX) stayed slightly elevated throughout the session with the high reaching 13.08. Lower resistance at 13-13.50 was cleared but held. Key support at 12.50 was recovered on Thursday with the bulls failing to hold this level on Friday.
Monday’s earnings announcements:
Before the open: None
After the close: None
Economic News
None
Market Thoughts
The bulls rebounded from the prior week’s losses to post a weekly win as Wall Street prepares for a busy fourth-quarter earnings season. For the week: the Nasdaq rallied 3.1%, the S&P 500 gained 1.8%, while Dow edged up 0.3%. Technology was the strongest sector after soaring 4.4% while Energy fell 2.4% to pace the laggards.
Friday’s results from the Financial sector was the start of a crucial quarter that will also include 2024 outlooks from all companies. Citigroup (C) was the only stock of the Four Horseman to settle higher after warning of a $1.8 billion quarterly loss.
JPMorgan (JPM) said its 4Q earnings were down 15% from the year ago quarter while Bank of America (BAC) also posted a declining year-over-year profit. Meanwhile, Wells Fargo (WFC) topped expectations but shares finished in the red.
Airline stocks were hammered with United Airlines (UAL) leading the way lower. Shares fell more than 10% while American Airlines (AAL) and Delta (DAL) weren’t far behind after tumbling more than 9%. Delta reported earnings that topped expectations but lowered its 2024 forecast. UAL and AAL fell in sympathy and on the possibly of higher oil prices following the ongoing U.S. air strikes.
This week’s earnings will continue to feature the Financial sector with the more important numbers from Tech coming over the following few weeks. The market is also closed on Monday and we expect a possible trading range to continue for the overall market.
The Dow and the S&P have basically been in trading ranges of 37,000-37,750 and 4,700-4,800, respectively, since mid-December. Both are pushing all-time highs despite the sluggishness and a situation that remains mostly bullish.
The Nasdaq has been more volatile, as well as the Russell, over the past couple of weeks. Tech is on the verge of fresh 52-week highs but remains over a 1,000 points away from its November 2021 all-time top north of 16,000. It wouldn’t be impossible for the Nasdaq to add another 7%-8% over the next few months but it would be asking a lot considering the massive 21% surge off the late October low at 12,543 to the run to 15,150 to close out 2023.
We have been highlighting the battle between the bulls and bears at 2,000 and 1,950 for the Russell with the bulls holding the upper half of this range throughout mid-December. There has been “stretch” to the upside to 2,071 with risk to 1,900-1,875 and the 50-day moving average if the bears can recover 1,950.
The small-caps tagged a low of 1,941 on the 5th and closed at 1,951 while smooching 1,934 last Thursday before going out at 1,955. Friday’s lower close was at 1,950.9635, technically, with the intraday bottom at 1,947. While there hasn’t been as much stretch to the downside, the Russell will likely give us a great clue on when the bears are starting to make their move.
As far as the RSI (relative strength index) levels for the major indexes, they are in the mid to lower 60’s and are currently giving a neutral reading. After reaching and maintaining overbought levels throughout December above 70, and clearing 80 and above, enthusiasm has cooled as some investors have gotten tired of chasing while seasoned vets have hedged their bets.
Key support levels on the S&P at 4,700 and the Dow at 37,000 held last week and will continue to be the theme going forward. We pointed this out again on Thursday and said this was a good signal another round of new highs would be (and still could be) coming.
We still want to see the VIX close back below 12.50 this week, or next, to confirm another leg higher for the major indexes. A close above 13.50 would be a yellow light with wiggle room up to 14.50. If the bears recover 15-15.50, it will be time to look for more bearish setups.
Momentum Options Play List
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AT&T (T, $16.48, up $0.25)
T February 18 calls (T240216C00018000, $0.11, up $0.02)
Entry Price: $0.26 (1/5/2024)
Exit Target: $0.75
Return: -58%
Stop Target: None
Action: Lower resistance at $16.50-$16.75 was cleared but held on the rebound to $16.62. Support is at $16.25-$16 and the 50-day moving average.
The mini selloff following last week’s dividend payment stalled the momentum coming into 2023. We still believe another good earnings report due out later this month could carry shares towards $18-$19.
ProShares UltraPro Short QQQ (SQQQ, $13.47, down $0.02)
SQQQ February 16 calls (SQQQ240216C00016000, $0.24, down $0.01)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: -60%
Stop Target: None
Action: Upper support at $13.25-$13 held with Friday’s low at $13.31. Resistance is at $13.50-$13.75.
