MomentumOptions.com Pre-Market Update for 4/11/2024
Key Inflation Report Zaps Small-Caps
8:00am (EST)
Commentary
The stock market fell on Wednesday following an unexpected hike in consumer prices last month. Specifically, the Consumer Price Index rose 0.4% over the previous month which put a damper on a possible June rate cut from the Fed.
The Nasdaq closed at 16,170 (-0.8%) after tapping a low of 16,092. Key support at 16,200 failed to hold. Continued closes below this level would indicate a further fade to 16,000-15,850 and the 50-day moving average. Resistance is at 16,350-16,500.
The S&P 500 traded down to 5,138 while ending at 5,160 (-1%). Near-term and upper support at 5,150-5,100 was triggered but held. A close below the latter and the 50-day moving average would imply a retest towards 5,050-5,000. Resistance is at 5,200-5,250.
The Dow settled at 38,461 (-1.1%) with the low hitting 38,304. Key support at 38,500 failed to to hold. Continued closes below this level would suggest weakness to 38,250-38,000. Resistance is at 38,750-39,000 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) bubbled to a high of 16.62 with current and lower resistance at 16.50-17 getting topped but holding. A move above 17.50 would be a bearish development for the market. Support is at 15-14.50.
Thursday’s earnings announcements:
Before the open: CarMax (KMX), Constellation Brands (STZ), Fastenal (FAST), Lovesac (LOVE)
After the close: Applied Digital (APLD), Argan (AGX)
Economic news:
Initial Jobless Claims – 8:30am
Producer Price Index – 8:30am
Market Thoughts
The two biggest focal points we said to watch for coming into this week were the small-caps and the VIX. Let’s start with the Russell 2000 as the index joined the major three in falling below its uptrend channel from the late October lows. Not only that, the small-caps also closed below their 50-day moving average as the index sank 2.5% to lead Wednesday’s weakness.
The Dow also closed firmly below its 50-day moving average which is also showing signs of flattening out. The Nasdaq came within 70 points of kissing its 50-day on yesterday’s low and rising support that has held since early November.
The S&P came within 38 points of falling below its 50-day moving average and a level that hasn’t been breached since early November, as well. With the bears being this close, it will be imperative the bulls hold both camps into the weekend.
As far as the VIX, the one positive for the bulls is that the index hasn’t made higher highs throughout the week and has easily held the 17.50 level. Once again, continued closes above this level is our bearish signal for the market. On the flip side, we also said the bears needed to get continued closes below 15. Yesterday’s backtest to the 200-day moving average and brief dip below this level was a start but nothing to get excited about.
The RSI (relative strength index) levels for the Nasdaq and the S&P 500 closed below key support at 50 and an indicator also tilting in the bears favor. This level was stretched last week and has been holding throughout the year. A further fade to 45-40 would confirm lower lows for the two indexes and likely the overall market.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 23-4 (85%). 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.
SoFi Technologies (SOFI, $7.56, down $0.33)
SOFI May 8 calls (SOFI240517C00008000, $0.55, down $0.15)
Entry Price: $0.55 (4/8/2024)
Exit Target: $1.10
Return: 0%
Stop Target: None
Action: Shares traded down to $7.48 with upper support at $7.50-$7.25 getting tripped but holding. Resistance is at $7.75-$8.
AT&T (T, $16.73, down $0.17)
T April 17 calls (T240419C00017000, $0.05, down $0.02)
Entry Price: $0.65 (3/11/2024)
Exit Target: $1.30
Return: -92%
Stop Target: None
Action: Close the trade today to save the remaining premium. A dividend was paid this week and yesterday’s close below the 50-day weighed heavily on the option premium.
Trades on Hold
Petróleo Brasileiro (PBR)
PBR April 18 calls (PBR240419C00018000)
