MomentumOptions.com Pre-Market Update for 3/18/2024
Bears Stay Aggressive
8:00am (EST)
Video
https://go.screenpal.com/watch/cZeFcvV73fn
Commentary
The stock market fell on Friday with the losses giving the bears their second-straight weekly win. The ongoing nervousness comes ahead of this week’s Federal Reserve’s policy meeting with inflation concerns remaining a hot topic.
The Nasdaq traded down to 15,925 before settling at 15,973 (-1%). Current and upper support at 16,000-15,850 failed to hold. A drop below the latter would imply a further slide towards 15,750-15,600 and the 50-day moving average. Resistance is at 16,100-16,250.
The S&P 500 ended at 5,117 (-0.7%) after bottoming out at 5,104. Upper support at 5,100-5,050 was approached and held. A fade below the latter would indicate weakness to 5,000-4,950 and the 50-day moving average. Resistance is at 5,150-5,200 with the recent all-time high at 5,189.
The Dow hit a low of 38,619 while finishing at 38,714 (-0.5%). Key resistance at 39,250 held. Near-term and upper support at 38,750-38,500 failed to hold. A close below the latter and the 50-day moving average would suggest downside risk to 38,250-38,000. Resistance is at 39,000-39,250 with the February all-time peak at 39,282.
Volatility Index
The Volatility Index (VIX) made a run to 15.53 with lower resistance at 15.50-16 and the 200-day moving average getting tripped but levels that held. A pop above the latter reopens upside stretch to 17.50-18. Support is at 14-13.50 and the 50-day moving average.
Monday’s earnings announcements:
Before the open: Acurx Pharmaceuticals (ACXP), Nano Labs (NA), Niu Technologies (NIU), Science Applications International (SAIC)
After the close: Alpine Immune Sciences (ALPN), Bit Digital (BTBT), Comtech Telecommunications (CMTL), FreightCar America (RAIL), RF Industries (RFIL), Zepp Health (ZEPP)
Economic News
Home Builder Confidence Index – 10:00am
Market Thoughts
The biggest development from last Thursday’s action was the move back above 15 on the VIX and the break below the uptrend line on the Russell 2000. Friday’s action was bearish as well with the Nasdaq and the S&P joining the Dow and the small-caps in falling below their uptrend channels off the October lows, as well.
We often talk about stretch on our charts but the technical damage over the past two sessions looks serious with the 50-day moving averages likely coming into play this week. The second-straight losing week might be showing the bears are finally awakening from their early November hibernation that has coincided with the four-month bullish rally.
The Nasdaq peaked at 16,449 on the March 8th which represented a 31% surge off the October 26th bottom at 12,543. The S&P soared 26% from the October 27th low of 4,103 to 5,189 on March 8th. The Dow zoomed 22% from its late October low of 32,327 to 39,282 that was reached on February 23rd. And finally, the Russell 2000 rallied 30% from its October 27th low of 1,633 to its March 8th peak at 2,115.
We predicted in January that nice round numbers of Nasdaq 16,000, S&P 5,000, and Dow 40,000 would come into play. We also stated these peaks would likely come in February so we were kinda close across the board on predicting a near-term market top and the price levels.
We also had incredible success in predicting market tops and bottoms throughout 2023 and a lot of it has to do with the volatility index. As far as the VIX, we have talked about not turning bearish on this market until the VIX clears and holds 17.50 for multiple sessions.
We mentioned there was some wiggle room on the VIX up to 16 last week with last Monday’s high at 16.04. Last Thursday’s peak at 15.33 and Friday’s top at 15.53 has higher highs in focus. The downtrend line is showing a move above 16.25-16.50 this week could get 17.50 in play along with the February 13th high candle-stick peak at 17.94.
The RSI (relative strength index) levels for the major indexes have the Dow and the Nasdaq teetering on 50. The Nasdaq fell below 50 to 48 in January but basically this level has been holding since early November. The S&P’s RSI closed at 57 and is in a downtrend. Continued closes below 50 across the board would be a bearish setup for the market.
The first quarter earnings season is just around the corner and is roughly three weeks away. We expect the market to tread water over this time frame with the possibility of lower lows and a break below the 50-day moving averages.
The rest of this month, but especially April, will be a big test to see if the market can resume its parabolic run to fresh all-time highs. The one earnings report that came out last week that was concerning for retail going forward was Dollar Tree (DLTR).
The company missed per share numbers by 11 cents and revenue by $36 million. They also plan to close 600 stores during the first half of this year and another 400 stores over the next few years citing current market conditions and individual store performance, among other factors.
Friday’s weakness pushed the major indexes towards our near-term support levels which are at: Dow 38,500; S&P 5,000; Nasdaq 15,800; and Russell 2,000. Backup levels are at: Dow 37,750; S&P 4,900; Nasdaq 15,600; and Russell 1,950. Having two layers of support remains near-term bullish. However, if the top numbers crack this week, selling pressure could pick up.
On that note, we could have new trades throughout the week so stay locked-and-loaded in case we take action.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 19-3 (86%). 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.
Chewy (CHWY, $17.39, up $0.15)
CHWY March 15 puts (CHWY240328P00015000, $0.65, down $0.10)
Entry Price: $0.70 (3/14/2024)
Exit Target: $1.40
Return: -7%
Stop Target: None
Action: Earnings are due out after Wednesday’s close and we should know the fate of this trade in after-hours. We went an extra week out because we are looking for fresh all-time lows on an earnings and/ or a revenue miss. We believe shares could test the low teens or high single-digits.
A drop below $16.50 this week should get the recent all-time low at $15.78 back in the picture and could be the early signal that we are looking for. Of course, all earnings trades are tricky because it depends on management’s wording and enthusiasm that is greeted by Wall Street’s reaction and expectations.
A move above $18.25-$18.50 could also be a warnings sign earnings might come in better-than-expected. If this is the case, we have into Wednesday afternoon to see how the action might unfold. If we exit early, we will send out a Trade Alert.
AT&T (T, $17.05, up $0.04)
T April 17 calls (T240419C00017000, $0.40, flat)
Entry Price: $0.65 (3/11/2024)
Exit Target: $1.30
Return: -38%
Stop Target: None
Action: Friday’s low kissed $16.89 with shares holding support at $17 and the 50-day moving average into the close. Resistance is at $17.25-$17.50.
We were hoping shares would clear and hold $17.50 to start last week but this trade has over over four weeks before expiration to make another run towards and past $18.
Trades on Hold
Petróleo Brasileiro (PBR)
PBR April 18 calls (PBR240419C00018000)
