MomentumOptions.com Pre-Market Update for 5/1/2023
Bulls Recover Key Resistance Levels
8:00am (EST)
Commentary
Wall Street showed continued strength on Friday following another round of upbeat earnings that offset slightly disappointing economic news. The second-straight day of gains helped the bulls recover for the monthly win following a very volatile week.
The S&P 500 made a run to 4,170 before going out at 4,169 (+0.8%). Prior and lower resistance at 4,150-4,200 was reclaimed. A pop above the latter and the February 2nd peak at 4,195 would be a bullish signal for a breakout towards 4,250-4,300 and levels from mid-August. Support is at 4,100-4,150 and the 50-day moving average.
The Dow settled at 34,098 (+0.8%) with the afternoon top at 34,104. Key resistance at 34,000 was cleared and held. Continued closes above this level would imply strength towards 34,250-34,500 with the January 13th peak at 34,342. Support is at 33,750-33,500.
The Nasdaq tagged a high of 12,227 while closing at 12,226 (+0.7%). Key resistance at 12,000 was recovered. Continued closes above this level would indicate a possible breakout to 12,350-12,500 and levels from last August. Support is at 11,900-11,750 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) fell for the second-straight day with the 52-week low hitting 15.72. Two-year and upper support from June 2021 at 15.75-15.50 was tripped but held by a smidge. A close below the latter would suggest a further fade to 15.50-15.25. Resistance is at 17.50-18.
Monday’s earnings announcements:
Before the open: Alexanders (ALX), Check Point Software Technologies (CHKP), Global Payments (GPN), Loews (L), Park Hotels & Resorts (PK), SoFi (SOFI), TG Therapeutics (TGTX)
After the close: Avis Budget Group (CAR), CF Industries (CF), Diamondback Energy (FANG), Flowserve (FLS), Hologic (HOLX), J & J Snack Foods (JJSF), Lattice Semiconductor (LSCC), MGM Resorts (MGM), MicroStrategy (MSTR), Rambus (RMBS), Sonoco (SON), Transocean (RIG), Woodward (WWD)
Economic News
PMI Manufacturing Index – 9:45am
ISM Manufacturing Index – 10:00am
Construction Spending – 10:00am
Market Thoughts
We mentioned volatility would be heightened with last week’s key earnings announcements and to watch for a run towards 20. Tuesday’s peak hit 19.86. Wednesday’s lower high at 19.61 and the bears inability to clear and recover 20 and the 50-day moving average were good clues a run towards key resistance and prior trading ranges for the major indexes could come back into focus.
We are halfway thru the first-quarter earnings season and once again the market is pushing key resistance levels and the VIX below 16. On April 17th we said “On a fundamental basis, the market is getting expensive, currently trading at 18 times earnings, and would coincide with a peak during the height of earnings season later this month. This would validate a drop towards 16.50-15 for the VIX, depending on momentum.” So far, so good.
Uptrend channels and key support levels were “stretched” on Tuesday, but rebounded, and the action was incredible to watch and chart. Last Thursday we stated “The Nasdaq fell out of an 18-session trading range on Tuesday, and actually closed below 11,800 by a point. However, the 50-day moving average held. We mentioned this would be our clue to possibly go short but we often talk about stocks and indexes getting “stretched”. Bingo.
This week key earnings report will be on Apple (APPL) with shares currently making a run at its 52-week peak north of $176. The company will announce numbers on Thursday with the action likely deciding the weekly outcome for the overall market as shares are heavily weighted.
Analysts are expecting earnings of $1.43 a share on revenue just under $93 billion. Friday’s breakout above $167.50 now becomes support with a close above $170 likely getting higher highs into play. Bullish investors need to be wary of a classic case of “buy the rumor, sell the news event” in case earnings come up light. If so, shares could retest $162.50-$160.
There will be a ton of other earnings updates this week from companies representing nearly every sector but none more than Apple. Last week’s rebound can be attributed to the fact companies are recording their best performance relative to analyst expectations since the fourth-quarter of 2021.
We have talked about the market peaking and volatility hitting new lows during the height of earnings season. There could also be a breakout towards last August highs. With the Fed returning to the scene this Wednesday, Wall Street’s bullishness could be helped or hindered depending on the language of the minutes and statements from Chairman Powell.
In any event, we will be in perfect shape to play a breakout, a continued trading range, or a return to lower lows.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 13-4 (77%). 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 I list one. I will send out a “Profit Alert” or “New Trade” if I 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.
We could have a New Trade this morning but we are on the fence with a few of our favorite setups and earnings due out. DraftKings (DKNG) and Pfizer (PFE) were recent double-digit winners but we were stopped out ahead of the events. We can wait until afterwards on these two to possible play the action.
Some of the other setups we are watching include ProShares UltraPro Short QQQ (SQQQ), ProShares Ultra VIX Short-Term Futures ETF (UVXY), and ProShares UltraPro QQQ (TQQQ). If we take action, we will send out a Text Alert.