MomentumOptions.com Pre-Market Update for 11/6/2018
VIX Holds 20 for 3rd-Straight Session
8:00am (EST)
The market got off to a mixed start for the week following ongoing trade concerns and ahead of the midterm elections. Additionally, FOMC meetings on Wednesday and Thursday this week weighed on investor sentiment.
China’s President Xi Jinping’s came back with some harsh words over the weekend for the U.S. stance on trade while the midterms are expected to shift the congressional balance of power. Volatility stayed slightly elevated but closed below major resistance at 20 for a 3rd-straight session.
The Dow gained 0.8% after holding positive territory for the majority of the session and reaching a peak of 25,505. Fresh and lower resistance at 25,600-25,800 held with a close above the latter and the 50-day moving average being a more bullish development.
The S&P 500 traded in a tight 27-point range while adding 0.6%. Resistance at 2,740-2,750 was split but held on the run to 2,744 with continued closes above the latter being a slightly bullish development.
The Russell 2000 dipped a half-point, or 0.03% after testing a midday low of 1,534. Fresh support at 1,535-1,520 was breached with a close below the latter likely leading to additional selling pressure.
The Nasdaq dropped 0.4% following the pullback to 7,255. Near-term support at 7,250-7,200 held with a move below the latter being a very bearish development.
Energy and Real Estate showed the most sector strength after jumping 1.7%. Financials and Utilities were up 1.6% and 1.4%.
Communication Services and Technology were the only sector laggards after falling 0.4% and 0.1%, respectively.
The S&P 500 Volatility Index ($VIX) stayed elevated throughout the session after trading to a high of 20.87. Resistance at 22-22.50 held with a move above the latter signaling risk towards 25-27.50.
Near-term support remains at 17.50-17 on continued closes below 20.50-20.
The Russell 3000 Index ($RUA) closed higher for the 4th time in 5 sessions with Monday’s high tapping 1,619. Resistance at 1,615-1,625 was split with additional hurdles at 1,640 and the 200-day moving average.
Continued closes back above 1,660 would be a more bullish development and a level that represents mid-October resistance and July to mid-August support.
Shaky support is at 1,600-1,590. A close below 1,580 would be a bearish development with risk towards 1,550-1,540 and late October lows.
RSI is showing signs of curling higher after clearing and holding lower resistance at 45-50. A close above the latter would signaling additional strength. Support is at 40 with a move below this level likely signaling another trip towards 35-30.
The Consumer Staples Select Spiders (XLP) had been in a tight trading range between $54.50-$55.50 for 4 sessions before Monday’s breakout to $55.95.
Fresh resistance at $56-$56.50 held with continued closes above the latter being bullish for a possible run towards $58-$59 and fresh 52-week peaks.
Rising support is at $55.25-$54.75. A close back below $54.50 would be a slightly bearish signal for lower lows.
RSI is in a slight uptrend with longer-term and upper resistance at 65-70 a major hurdle. A close above this level would be a continued bullish development signaling additional strength. Support is at 55-50.
We got some nice pin action with our current XLP so let’s go check the tape.
Momentum Options Play List
Closed Momentum Options Trades for 2018: 42-16 (72%). 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 Daily updates.
Morgan Stanley (MS, $45.82, down $0.13)
MS November 50 calls (MS181116C00050000, $0.10, flat)
Entry Price: $0.60 (10/3/2018)
Exit Target: $1.20
Return: -83%
Stop Target: None
Action: Support at $45.50-$45.25 held on the backtest to $45.63. Lowered resistance is at $46-$46.50.
Consumer Staples Select Spiders (XLP, $55.80, up $0.69)
XLP January 58 calls (XLP190118C00058000, $0.55, up $0.15)
Entry Price: $0.35 (9/20/2018)
Exit Target: $0.70
Return: 61%
Stop Target: 38 cents, raise to 45 cents (Stop Limit)
Action: Raise the Stop Limit from 38 cents to 45 cents. Volume was heavy yesterday with traders expecting a possible run towards all-time highs by yearend.