MomentumOptions.com Pre-Market Update for 9/9/2024
S&P Falls Below 50-Day MA
8:00am (EST)
Video
https://go.screenpal.com/watch/cZQQeZVRCDB
Commentary
The bears cracked additional layers of support on Friday as the major indexes resumed the selloff from the start of last week. Nonfarm payrolls were blamed after growing by just 142,000 and well below forecasts for a print of 161,000.
The Nasdaq ended at 16,690 (-2.6%) with the afternoon low at 16,668. Early August and upper support at 16,750-16,600 was breached and failed to hold. A close below the latter would imply a further fade to 16,500-16,350. Lowered resistance is at 16,850-17,000.
The S&P 500 kissed a low of 5,402 while closing at 5,408 (-1.7%). Key support at 5,400 was approached and held. A move below the latter would suggest further weakness to 5,350-5,300. Lowered resistance is at 5,450-5,500 and the 50-day moving average.
The Dow settled at 40,345 (-1%) after dipping to 40,297. Fresh support at 40,500-40,250 failed to hold. A drop below the latter and the 50-day moving average would indicate risk towards 40,000-39,750. Resistance is at 41,000-41,250.
Volatility Index
The Volatility Index (VIX) traded up to a weekly peak of 23.76 while closing back above 20. Resistance at 23.50-24 was cleared but held. Support is at 22-21.50.
Monday’s earnings announcements:
Before the open: None
After the close: Calavo Growers (CVGW), Limoneira (LMNR), Matrix Service Company (MTRX), Oracle (ORCL)
Economic News
Wholesale Trade Sales – 10:00am
Consumer Credit – 3:00pm
Market Thoughts
We said September is historically a volatile month…
For the week, the Nasdaq tanked 5.8%; the S&P 500 sank 4.3%; and the Dow stumbled 2.9%.
We mentioned last Tuesday’s crack below key support levels and breakdown out of the uptrend channels off the August 5th lows were very bearish developments for the market. Friday’s losses capped the worst week for the S&P 500 since March 2023 and 2022 for the Nasdaq.
Backup support at 5,400 held on the S&P but there is downside pressure to 5,200 if this fails to hold this week. The August low is at 5,119. The close below 16,750 on the Nasdaq was especially bearish as there is likely another retest towards 16,200 and the 200-day moving average coming. The August 5th bottom kissed 15,708.
For the Dow this week, we are watching 40,295 and the August 15th low on the breakout above the 40,000 level for that session. The 50-day moving average is right 40,200. We have highlighted a close below 40,000 this month would confirm a near-term top from the August 30th all-time high at 41,585.
As for the small-caps, the Russell 2000 plummeted 6% for the week while settling at 2,091 on Friday. The bulls held 2,075 but a close below this level would imply another slide towards 2,000.
Tuesday’s technical damage was a clear warning signal lower lows would come into play and that played out like a fiddle. While there could be some recovery over the next week or so on a possible Fed rate cut, we think the August lows will come back into play during the first few weeks of the 3Q earnings season, or by the end of October.
The one thing that might change our mind of avoiding a retest to the August lows is if multiple layers of higher resistance are cleared and held by month end. They are at Dow 41,500; S&P 5,600, Nasdaq 17,500; and Russell 2,200.
The VIX has wiggle room up to 25 before we possibly see another round of panic selling. If cleared a run to 34-65 could come quickly, depending on the heightened volatility. The August 5th peak hit 65.73. The bulls need to get the VIX back below 20 just to start damage control from last week.
We closed out four more winners last week to run our winning streak to 21-straight and added a new trade on Friday in Ford. We also have three updates from our Surge Trades Live Webinar from August 29th that have well, surged. The only trade we suggest new subscribers get into is Ford. If you were not in the event, do join us in the future as we try to have them monthly. Email me if you need a link.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 52-9 (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.
Ford (F, $10.58, down $0.19)
F October 10 puts (F241018P00010000, $0.20, up $0.04)
Entry Price: $0.20 (9/6/2024)
Exit Target: $0.60
Return: 0%
Stop Target: None
Action: Shares tested a low of $10.53 with key support at $10.50 holding. A close below this level would get $10.25-$10 in play.
The August 5th and 52-week low is at $9.49 and an area we feel could easily be tested by mid-October. If so, these puts will be 50 cents in-the-money for a 150% return. If that scenario plays out, shares could eventually test $9-$8.50 into or after earnings.
Goodyear Tire & Rubber (GT, $7.92, down $0.03)
GT January 10 calls (GT250117C00010000, $0.10, unchanged)
Entry Price: $0.60 (8/29/2024)
Exit Target: $1.20
Return: -83%
Stop Target: None
Action: Key support at $7.75 held on the pullback to $7.71. A close below this level and the August 9th low at $7.63 would open up downside risk to $7.50-$7.25.
These options do not expire until January so we have plenty of time to wait for an eventual run towards $10. We could also average down the cost at some point if shares avoid lower lows and clear $8.50.
Newell Brands (NWL, $7.61, up $0.01)
NWL January 8 calls (NWL250117C00008000, $0.70, unchanged)
Entry Price: $0.45 (8/29/2024)
Exit Target: $0.90
Return: 56%
Stop Target: 50 cents (Stop Limit)
Action: Set an initial Stop Limit at 50 cents to start protecting profits and to avoid a loss.
Key resistance at $7.75 held on the run to $7.66. A close above this level would be an ongoing bullish signal. Support is trying to build a base at $7.50 and the 200-day moving average.
AT&T (T, $20.97, up $0.32)
T October 21 calls (T241018C00021000, $0.55, up $0.20)
Entry Price: $0.10 (8/29/2024)
Exit Target: $1.00
Return: 450%
Stop Target: 40 cents (Stop Limit)
Action: Set an initial Stop Limit at 40 cents to start protecting these massive gains and to avoid a loss.
Shares tagged another fresh 52-week peak and key resistance at $21 on Friday. Continued closes above this level would indicate strength to $21.25-$21.50.
We told you a move above $20 could lead to a major breakout. Bingo. However, RSI is above 76 and overbought levels so a near-term top might be coming.
