MomentumOptions.com Pre-Market Update for 2/5/2024
Strong Jobs Report Powers Fresh Highs
8:00am (EST)
Commentary
The stock market wrapped up a volatile and busy week with Friday’s gains helping the major indexes trip another round of all-time highs and 52-week peaks. A better-than-expected jobs report showed the economy created 353,000 jobs in January – well above forecasts for a print of 170,000.
Solid Tech earnings also helped sentiment after Meta Platforms (META) and Amazon (AMZN) topped Wall Street’s estimates. META rallied 20% after announcing its first ever dividend while AMZN jumped 8% to a one-year high.
The Nasdaq traded up to 15,664 while closing at 15,628 (+1.7%). Lower resistance at 15,600-15,750 was cleared and held. A pop above the latter would suggest upside to 15,850-16,000. Support is at 15,500-15,350.
The S&P 500 settled at 4,958 (+1.1%) with the intraday lifetime high hitting 4,975. New and lower resistance at 4,950-5,000 was topped and held. Continued closes above the latter would imply further strength towards 5,050-5,100. Support is at 4,900-4,850.
The Dow topped out at 38,783 before finishing at 38,654 (+0.4%). New and lower resistance at 38,750-39,000 was challenged and held. A move above the latter would indicate momentum to 39,250-39,500. Support is at 38,500-38,250.
Volatility Index
The Volatility Index (VIX) kissed a low of 13.39 with upper support at 13.50-13 getting breached but holding. A drop below the latter and the 50-day moving average would signal weakness to 12.50-12. Resistance is at 14-14.50.
Monday’s earnings announcements:
Before the open: None
After the close: Chegg (CHGG), Crown Holdings (CCK), Palantir Technologies (PLTR), Rambus (RMBS), Simon Property Group (SPG)
Economic News
PMI Manufacturing Index – 9:45am
ISM Manufacturing Index – 10:00am
Market Thoughts
Despite last week’s volatility, the Dow, S&P, and the Nasdaq all rallied over 1% following the midweek pullback. The Russell, however, fell over 1% but did hold the 1,950 level. We always talk about one-day not making a trend and the bears inability to follow thru after the Fed update last Wednesday keeps the bulls in pursuit of nice round numbers. Here were our thoughts once again from December 28th:
“If we add another 1%-2% to our prior price targets for the major indexes, we could see Nasdaq 15,150-15,300; Dow 38,000-38,250; and S&P 4,850-4,900 at some point to close out 2023 or in January.
These were our notes on January 21st:
“The Nasdaq is roughly 4% away from its all-time high north of 16,000 after holding key support at 14,800 last Wednesday. We often say one day doesn’t make a trend and we mentioned Thursday’s morning, higher highs could still be in play.
If the Nasdaq does make a run towards 16,000, it could be a rising tide that lifts all boats. If this were the case, we could see Dow 40,000 and S&P 5,000 – at some point in 2024.”
With the major Tech earnings out of the way, the Nasdaq will have to make a 500-600 point move to reach its closing high at 16,057 and intraday peak at 16,212. Both targets were hit in November 2021 and would roughly mean another 4% upside for the index.
This will be hard to envision for February as the major indexes are already up 20%-25% from the October lows, but certainly possible. Remember, the market can remain irrational longer than you can remain solvent – John Maynard Keynes.
We still haven’t gotten the bearish signals across the board that we have stated throughout January and we talked about the market peaking once Apple and Big Tech announced earnings last week. It’s hard to say at this point if Friday might be THE near-term top, but we think it may be more realistic if the market pauses and makes another run at all-time highs in April.
This would coincide with the next round of earnings with the first quarter of 2024 in the books. With that said, it is still possible the S&P makes a run to 5,000 (this week?) but the Dow needs another 3+% move to clear 40,000.
The Russell cleared and held the 2,000 level on Monday but struggled afterwards while holding key support at 1,950. This should be the first bearish clue to drop in February on a close below this level while a recovery of 2,000 keeps bullish hopes alive.
This would indicate a more broadening rally if the Russell recovers as the fresh highs in the market have been fueled by the typical heavy weight hitters. This has pushed earnings multiples higher, which at some point, will catch up to the market.
The VIX has been trapped between its 50-day and 200-day moving averages for seven-straight sessions and 12 out of the past 14. We have talked about the importance of the index getting back below 12.50 and test fresh 52-week lows but that hasn’t happened. A close back below 13.50-13 this week would be slightly bullish going forward while continued closes above 15 favors the bears.
As a reminder, key support levels to watch again this week are at: Nasdaq 14,800; S&P 4,700; and Dow 37,000. As for the Russell, 1,950 but more importantly 1,925-1,900 and the 50-day moving average.
We are closing one trade today and we will have two in play on Tuesday. Once the dust settles, we could have New Trades this week so stay locked-and-loaded.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 4-1 (80%). 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.
Snap (SNAP, $17.05, up $1.18)
SNAP March 20 calls (SNAP240315C00020000, $0.95, up $0.34)
Entry Price: $0.85 (2/2/2024)
Exit Target: $1.70
Return: 12%
Stop Target: None
Action: Shares reached a peak of $17.11 with lower resistance at $17-$17.25 getting recovered. Support is at $16.50-$16.25.
There was heavy volume in the SNAP March 23 calls and March 12 puts on Friday and is letting us know Wall Street is preparing for a massive price move. We have shown the current $2 trading range in more detail in our recent videos.
There is certainly added risk as the trading range has played out for six weeks going into earnings on Tuesday so keep this in mind as this could be a big hit or miss trade.
Ford Motor (F, $12.14, up $0.04)
F March 11 puts (F240315P00011000, $0.20, flat)
Entry Price: $0.50 (1/25/2024)
Exit Target: $1.00
Return: -60%
Stop Target: None
Action: Lower resistance at $12.25-$12.50 held on the run to $12.19. Support is at $12-$11.75 and the 200-day moving average.
Earnings are due out Tuesday, as well.
ProShares UltraPro Short QQQ (SQQQ, $11.72, down $0.62)
SQQQ February 16 calls (SQQQ240216C00016000, $0.03, down $0.02)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: -95%
Stop Target: None
Action: Close the trade this morning to save the remaining premium.
We can enter a new position once shares clear $13-$14 and the 50-day moving average levels out. These options will likely expire well before that happens.
