MomentumOptions.com Pre-Market Update for 2/1/2024
Fed Holds Rates Steady, Market Sinks
8:00am (EST)
Commentary
The stock market tumbled on Wednesday after the Fed maintained its benchmark rate but cautioned it likely won’t begin lowering interest rates until it sees further progress on inflation. Wall Street was looking for a rate cut as early as March but Fed chairman Powell stated it’s probably not the most likely scenario.
The Nasdaq ended on its session low of 15,164 (-2.2%). Fresh and upper support at 15,300-15,150 failed to hold. A move below the latter would indicate a further fade to 15,000-14,850. Resistance is at 15,500-15,650 with last week’s 52-week peak at 15,629.
The S&P 500 went out on the day’s low at 4,845 (-1.6%). New and upper support at 4,850-4,800 failed to hold. A drop below the latter be a slightly bearish signal for a retest to 4,750-4,700. Resistance at 4,900-4,950.
The Dow settled at 38,150 (-0.8%) despite hitting another all-time high of 38,588. New and lower resistance at 38,500-38,750 was cleared but held. Key support at 38,000 held on the pullback to 38,139 afterwards.
Volatility Index
The Volatility Index (VIX) made a run to 14.61 with lower resistance at 14.50-15 getting cleared but holding. A move above the latter and the 200-day moving average would imply upside risk towards 15.50-16. Support is at 13.25-13 and the 50-day moving average.
Thursday’s earnings announcements:
Before the open: Altria Group (MO), Honeywell International (HON), Merck (MRK), Peloton Interactive (PTON), Royal Caribbean Cruises (RCL), Stanley Black & Decker (SWK)
After the close: Amazon (AMZN), Apple (AAPL), Meta Platforms (META), Microchip Technology (MCHP), Skechers (SKX)
Economic news:
Initial Jobless Claims – 8:30am
PMI Services Index – 9:45am
ISM Manufacturing Index – 10:00am
Construction Spending – 10:00am
Market Thoughts
The overall market posted its worst day in months and appears to be topping out during the busiest week of earnings – and something we have been warning about. Big Tech earnings have been mixed this week with Apple (AAPL), Amazon (AMZN) and Meta Platforms (META) reporting after tonight’s close.
The market cap for these three companies is well north of $5 trillion so their results will have a huge impact on Friday’s open.
As far as the Fed, we mentioned they would stand pat and the selloff afterwards can’t be judged in one session, or basically hours of trading. If there is follow thru today, and on Friday, it could be a blip on an otherwise bullish January.
If there is market weakness, or lower lows, into the weekend, there is a good possibility we are starting to see the process of a top playing out. Last year, the market had a solid January before pulling back in February and we have predicted the same setup again this year.
Of course, calling exact market tops and bottoms is a tricky endeavor but we were extremely accurate in predicting much of 2023’s action and so far this year. Knock on wood.
With the height of earnings season and the Fed news this week, we predicted the market could move up or down 2%-3% by the time the dust settles on Friday. The major indexes have pulled back from overbought levels after RSI (relative strength index) readings cleared 70.
The Nasdaq and S&P are headed towards 50 and a neutral RSI reading if this level holds. The Dow’s RSI has rolled over but is above 60. Meanwhile, RSI on the VIX is trending higher after holding 50 and a slightly bearish signal for the market.
As a reminder, key support levels to watch going into Friday’s close are at: Nasdaq 14,800; S&P 4,700; and Dow 37,000. As for the Russell, the bulls need to hold 1,925-1,900 and the 50-day moving average.
We could have a busy February if the technical outlook turns bearish but we still have to respect the bulls resiliency to push higher highs. As always, if we issue a new trade, or take action on current ones, we will send out an Alert.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 3-0 (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.
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.
Ford Motor (F, $11.72, down $0.06)
F March 11 puts (F240315P00011000, $0.30, unchanged)
Entry Price: $0.50 (1/25/2024)
Exit Target: $1.00
Return: -40%
Stop Target: None
Action: Key resistance at $12 and the 200-day moving average held on the opening pop to $11.99. Support is at $11.50-$11.25 and the 50-day moving average.
Earnings are due out next week on February 6th. We aren’t expecting an overwhelming quarter and we are looking for the company to lower expectations for 2024.
ProShares UltraPro Short QQQ (SQQQ, $12.78, up $0.71)
SQQQ February 16 calls (SQQQ240216C00016000, $0.06, up $0.02)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: -90%
Stop Target: None
Action: Fresh and lower resistance at $12.75-$13 was cleared and held following the surge to $12.80. New support is at $12.50-$12.25.
