MomentumOptions.com Pre-Market Update for 9/5/2024
Bears Pushing Key Support Levels
8:00am (EST)
Commentary
The market somewhat stabilized on Wednesday after Tuesday’s pounding and fade below key support levels. However, the major indexes were mostly lower as the bears pushed backup layers of support to suggest a possible near-term market top.
The Nasdaq went out at 17,084 (-0.3%) with the intraday low at 16,984. Upper support at 17,000-16,850 was tripped but held. A close below the latter would indicate risk to 16,750-16,600. Lowered resistance is at 17,250-17,400.
The S&P 500 traded down to 5,503 while settling at 5,520 (-0.1%). Key support at 5,500 was approached and held along with the 50-day moving average. A close below these levels will get 5,450-5,400 in focus. Resistance is at 5,550-5,600.
The Dow finished at 40,974 (+0.1%) after making a run to 41,172. Lower resistance at 41,000-41,250 was cleared but held. A close above the latter would signal upside towards 41,500-41,750 and fresh all-time peaks. Support is at 40,750-40,500.
Volatility Index
The Volatility Index (VIX) tested a high of 23.31 while closing above key support at 20 for the second-straight day. Resistance at 23-23.50 was topped but held.
Thursday’s earnings announcements:
Before the open: FuelCell Energy (FCEL), Korn/Ferry International (KFY), Movado Group (MOV), Toro (TTC)
After the close: Broadcom (AVGO), DocuSign (DOCU), Rent the Runway (RENT), Smartsheet (SMAR), Zumiez (ZUMZ)
Economic news:
ADP Employment Report – 8:15am
Initial Jobless Claims – 8:30am
PMI Services Index – 9:45am
ISM Manufacturing Index – 10:00am
Market Thoughts
We have been highlighting key support numbers for the major indexes over the past few weeks at: Dow 40,500; S&P 5,550; and Nasdaq 17,500 with a break below these levels getting backup help in play. These were at Dow 40,000; S&P 5,500, and Nasdaq 17,350.
The market got off to a rough start on a shortened week after Tuesday’s 3+% spanking in both the Nasdaq and the Russell. The Nasdaq closed at 17,136 while the Russell ended at 2,149 and below key support at 2,175. The Dow was the only index to hold its first wave of support at 40,500 while the S&P settled below 5,550 at 5,528.
The VIX surged 33% on Tuesday to close back above 20. We also mentioned in Monday’s update another move above this level could cause panic selling.
The overall action was a bearish development for the market, in general, and did some serious technical damage with both the Dow and the Russell falling out of their uptrend channels from the August 5th lows.
Wednesday’s action produced lower lows on the Nasdaq and the S&P, as we highlighted earlier, with both holding 17,000 and 5,500, respectively. The Russell breached 2,135 but held this crucial level of support into the closing bell.
If these three key support levels fail to hold into the weekend, the selling pressure could intensify. Continued closes above 20 on the VIX along with higher highs would be an ongoing bearish development for the market.
We have now closed 19-straight winners since late May with both BAC trades winners with Stop Limits. We could get into a couple of new trades this morning so be on the lookout for updates after the open.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 50-9 (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.
Bank of America (BAC, $40.50, down $0.20)
BAC September 41 calls (BAC240920C00041000, $0.60, down $0.05)
Entry Price: $0.35 (8/19/2024)
Exit Target: $0.70
Return: 71%
Stop Target: 45 cents (Stop Limit)
BAC October 42 calls (BAC241018C00042000, $0.80, down $0.10)
Entry Price: $0.50 (8/19/2024)
Exit Target: $1.00
Return: 60%
Stop Target: 70 cents (Stop Limit)
Action: Upper support at $40.25-$40 and the 50-day moving average were challenged but held on the dip to $40.28. A drop below the latter will likely trip our Stop Targets. Resistance is at $40.75-$41.
