Bulls Bounce Back but Resistance Holds
MomentumOptions.com Pre-Market Update for 5/31/2019
Bulls Bounce Back but Resistance Holds
8:00am (EST)
The market showed strength throughout much of Thursday’s action following a goldilocks GDP report and a stable jobless claims number. Near-term resistance levels held ahead of the late day weakness that came in the final hour of trading.
The major indexes held the majority of their gains with the small-caps being the weak link. Volatility relaxed after closing above a key support level but remains slightly elevated heading into the final trading day of the month.
The Nasdaq rose 0.3% following the morning run to 7,595. Prior and lower resistance at 7,600-7,650 was challenged but held with a close above the latter getting 7,700-7,750 back in play.
The S&P 500 climbed 0.2% after tapping a first half high of 2,799. Key resistance at 2,800 held with a close back above this level signaling possible strength towards 2,825-2,850.
The Dow also added 0.2% following the intraday run to 25,218. Prior and lower resistance at 25,250-25,500 held with a close above the latter and the 200-day moving average being a more bullish development.
The Russell 2000 fell 0.3% despite testing a morning peak of 1,500. Near-term and lower resistance at 1,500-1,515 was tapped but held with continued closes above these levels signaling a possible near-term bottom.
Consumer Discretionary led sector strength after rising 0.7%. Technology, Real Estate and Healthcare gained 0.6%.
Energy lead sector weakness after giving back 1.3%. Financials and uTilities rounded out the laggards with losses of 0.3% and 0.2%, respectively.
In economic news, GDP growth was revised down to fractionally a 3.1% pace, beating forecasts of 3%, after posting a better than expected 3.2% gain in the Advance report. For Q1, consumption was bumped up to 1.3% versus 1.2% initially. Fixed investment was nudged down to 1% from 1.5%, with nonresidential spending at a 2.3% rate from 2.7%, and spending on residential getting knocked down to -3.5% from -2.8%. Government consumption was revised up to 2.5% versus 2.4% previously. Inventories contributed $28.7 billion (0.60%) versus $31.6 billion (0.65%). Net exports added $52.1 billion (0.96%) from $56.4 billion (1.3%). The PCE price index slipped to 0.8% versus 0.9%. The core rate dipped to 1% from 1.3%.
Initial Jobless Claims rose 3,000 to 215,000, matching forecasts. The 4-week moving average fell to 216,750 from 220,500. Continuing claims fell 26,000 to 1,657,000 following the 19,000 rise to 1,683,000 the prior week.
International Trade in Goods Balance for April at checked in at -$72.1 billion versus estimates of -$71.9 billion. Exports dropped 4.2% to $134.59 billion, while imports slipped 2.7% to $206.71 billion. Retail inventories were up 0.5% to $660.9 billion from $657.8 billion. Wholesale inventories increased 0.7% to $674.5 billion from $670.1 billion.
Pending Home Sales fell 1.5% to 104.3 in April, following March’s 3.9% jump to 105.9. On a 12-month basis, the index has posted a small, but positive 0.4% year-over-year rate, breaking a string of 11 consecutive months in contraction, and is only the second expansionary reading over the past 17 months. Regionally, 3 of the 4 sectors declined, led by the South (-2.5%), followed by the Northeast and West (both -1.8%), with the only gain seen in the Midwest (1.3%).
The S&P 500 Volatility Index ($VIX) tested a morning low of 16.72 with upper support at 17-16.50 and the 200-day moving average holding. The close below above the 17.50 level was a slightly bullish signal.
Near-term resistance remains at 18.50-19 with backup help at 19.50-20. Thursday’s afternoon peak reaching 18.11 when the market dipped into negative territory.
The Spider Small-Cap 600 ETF (SLY) fell for the 3rd-straight session despite trading to a morning high of $64.83. Current resistance at $65-$65.50 held with additional hurdles at $66-$66.50. The 50/200-day moving averages are showing signs of rolling over and remain in slight downtrends.
Mid-January support at $64-$63.50 was tripped but held on the fade to $63.79 afterwards. A close below the latter would be a continuing bearish development with downside risk towards $63-$62.
RSI is in a downtrend with mid-December support and the monthly low at 33 holding. A close below this level could lead to additional weakness towards 30-25. Resistance is at 35-40.
The Consumer Discretionary Select Spiders (XLY) snapped a 2-session slide after trading to an intraday high of $112.79. Current and lower resistance at $112.50-$113 was cleared but held. Continued closes above the $115 level would be a more bullish signal of a near-term bottom.
Shaky support is at $112-$111.50. A move below the latter opens up risk towards $110.50-$110 and the 200-day moving average.
RSI is in a slight uptrend with resistance is at 40. A close above this level would be a bullish development for additional strength towards 45-50. Support is at 35-30.
While I was hoping to get into more new positions this week, I had a feeling the choppiness and possible bottoming process would last into both end. Today’s action should provide continuing signs if this process is playing out but I’m somewhat worried if there isn’t a solid rebound next week, lower lows are in store.
Of course, that isn’t a bad thing as we can start positioning ourselves with put options to play a continued pullback. If there are hints of that happening ahead of today’s close, I could issue New Trade Alerts. If you don’t hear from me by 3:30pm (EST), have a safe and great weekend.
Momentum Options Play List
Closed Momentum Options Trades for 2019: 20-8 (70%). 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 “NewTrade” 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.
AT&T (T, $31.86, down $0.05)
T July 33 calls (T190719C00033000, $0.35, flat)
Entry Price: $0.47 (5/24/2019)
Exit Target: $1.00
Return: -26%
Stop Target: None
Action: Shares tested a low reached $31.64 with upper support at $31.75-$31.50 getting breached but holding. Lowered resistance is at $32-$32.25.
Cypress Semiconductor (CY, $17.89, up $0.64)
CY September 17 calls (CY190920C00017000, $2.20, up $0.55)
Entry Price: $0.75 (5/16/2019)
Exit Target: $3 (closed half at $1.70 on 5/29)
Return: 160%
Stop Target: $1.40, raise to $1.60 (Stop Limit)
Action: Raise the Stop Limit at $1.40 to $1.60 to further protect and ensure at least a triple-digit profit.
Shares tested a high of $18.08 with fresh and lower resistance at $18-$18.25. The 52-week peak is at $18.59. New support is at $17.50-$17.25.
Marvell Technology (MRVL, $22.19, up $0.17)
MRVL June 25 calls (MRVL190621C00025000, $0.20, up $0.05)
Entry Price: $0.47 (5/16/2019)
Exit Target: $1.00 (Limit Order)
Return: -57%
Stop Target: None
Action: Lower resistance at $22.25-$22.50 held on the run to $22.21 yesterday. Support is at $21.75-$21.50.
Shares were pushing $23 in after-hours action last night following a better-than-expected earnings report.