MomentumOptions.com Pre-Market Update for 8/15/2024
S&P Recovers 50-Day Moving Average
8:00am (EST)
Commentary
The stock market showed continued strength on Wednesday after a key economic report matched expectations and added speculation of an interest rate cut sooner, rather than later. Specifically, the Consumer Price Index rose 0.2%, amid a rise in energy prices, but matching forecasts.
The Nasdaq went out at 17,192 (+0.03%) after reaching a peak of 17,260. Fresh and lower resistance at 17,100-17,250 was cleared and held. A close above the latter would indicate strength to 17,350-17,500. Rising support is at 17,000-16,850.
The S&P 500 topped out at 5,463 while ending at 5,455 (+0.4%) and back above its 50-day moving average. New and lower resistance at 5,450-5,500 was cleared and held. A pop above the latter would signal strength towards 5,550-5,600. Support is at 5,400-5,350.
The Dow settled at 40,008 (+0.6%) with the afternoon high at 40,068. Mid-July and key resistance at 40,000 was reclaimed. Continued closes above this level would imply further upside to 40,250-40,500. Support is at 39,750-39,500.
Volatility Index
The Volatility Index (VIX) tagged a late day low of 16.12 with key support at 17.50 getting tripped and holding. A move below 15 would be a more bullish signal for the market of a near-term bottom. Lowered resistance is at 18-18.50.
Thursday’s earnings announcements:
Market Thoughts
Coming into the week, we talked about the major indexes needing to overcome several layers of resistance before we could say a near-term bottom was possibly in. For the Nasdaq and the S&P, the main hurdles were at 17,000 and 5,400, respectively. These levels were cleared on Tuesday.
We talked about these areas also serving as crucial support in late July and once they were cracked, selling pressure would ensue. Now that they are recovered, there is some stability for the Nasdaq and the S&P.
We would still like to see 17,500 and the 50-day cleared on the Nasdaq and 5,550 and the August 1st peak at 5,566 topped and held for several sessions before we would start trusting the bulls again. A close back below 17,000 for the Nasdaq and 5,400 on the S&P ahead of the weekend would be bearish.
The Dow recovered 40,000 which was key resistance in the middle of May. The index is a little more than 3% away from its July 18th all-time peak at 41,376. There is gap up potential to 41,000 if the blue-chips clear 40,100 this week, or next.
The Russell has been trying to recover 2,100 and the 50-day moving average over the past two sessions. While this would be slightly bullish, the more important hurdle is at 2,135 and the prior breakout point from July 12th.
The small-caps closed back below 2,075 on Monday with the low at 2,058. It’s safe to assume if the bears crack 2,050 again, the Russell could make another quick backtest towards the 2,000 level.
The VIX flirted with 20 on Monday and closed below this level on Tuesday. We said a close below 17.50 by midweek would favor the bulls. Bingo. However, we mentioned the biggest challenge would be the recovery of the 50-day and 200–day moving averages around the 15 area. A move above 25 could ignite another round of selling pressure.
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Teva Pharmaceuticals (TEVA, $18.01, up $0.88)
TEVA September 18 calls (TEVA240920C00018000, $0.90, up $0.42)
Entry Price: $0.60 (8/14/2024)
Exit Target: $1.20
Return: 50%
Stop Target: 63 cents (Stop Limit)
Action: Set a Stop Limit at 63 cents to start protecting profits and to avoid a loss.
Shares traded to a fresh 52-week high of $18.05 with key resistance at $18 getting cleared but / and holding. Continued closes above this level would suggest a possible breakout to $19-$20. Support is at $17.25-$17.
Rocket Companies (RKT, $19.06, up $0.43)
RKT September 20 calls (RKT240920C00020000, $0.80, up $0.20)
Entry Price: $0.45 (8/9/2024)
Exit Target: $1.35
Return: 78%
Stop Target: 55 cents (Stop Limit)
Action: Set a Stop Limit at 55 cents.
Shares tagged a 52-week peak of $19.11 with fresh and lower resistance at $19-$19.25 getting cleared and holding. Support is at $18.50-$18.25.
We mentioned this was our favorite setup coming into the week and we are glad to see quick gains. We are still looking for shares to make a fun at 20 but they are at overbought levels once again with RSI closing above 70.
