MomentumOptions.com Pre-Market Update for 7/3/2023
S&P Tags Another 52-Week Peak
8:00am (EST)
Video Update: Please click on the link to review our current market outlook along with a few stocks we are watching (copy and paste passcode):
https://us06web.zoom.us/rec/share/sNTxaUgYmXWWVdlCfUdPDGN1iV-Ko7gCfZ5TJj6xuhV2kBnSqU7ei6CL6RLxiRBM.O4iH4724kETCvQSd?startTime=1688350471000
Passcode: =Th?g5i7
Commentary
The stock market closed out the month, second quarter and first half of 2023 on a high note with the broader index pushing a fresh 52-week high and Tech within striking distance. Sentiment was helped by a better-than-expected reading for the core personal consumption expenditures price index, which rose 0.3% for the month.
The Nasdaq tested a high of 13,816 while ending at 13,787 (+1.5%). Lower resistance at 13,750-13,900 was cleared and held. A close above the latter and last month’s 52-week peak at 13,864 would signal a run towards 14,000-14,150. Support is at 13,650-13,500.
The S&P 500 closed at 4,450 (+1.2%) after trading to a 52-week high of 4,458. Key resistance at 4,450 was cleared and held. Continued closes above this level keeps upside towards 4,500-4,550 in play. Support is 4,400-4,350.
The Dow peaked at 34,467 before finishing at 34,407 (+0.8%). Lower resistance at 34,250-34,500 was recovered. A pop above the latter would suggest a retest towards 34,750 with last December’s peak at 34,712. Support is at 34,000-33,750.
Volatility Index
The Volatility Index (VIX) was up for the second-straight session despite the low hitting 12.96. Upper support at 13-12.50 was tripped but held. A close below the latter and the recent 52-week low at 12.73 would be an ongoing bullish signal for the market. Resistance is at 14-14.50.
Monday’s earnings announcements:
Before the open: None
After the close: None
Economic News
PMI Services Index – 9:45am
Construction Spending – 10:00am
ISM Manufacturing Index – 10:00am
Market Thoughts
For the month of June, the Nasdaq jumped 6.6% while the S&P 500 rose 6.5%, with both indexes notching gains for the fourth-straight month. The Dow added 4.6%.
For the second quarter, the Nasdaq surged 12.8% while the S&P 500 advanced 8.3%. The Dow was higher by 3.4%.
And for the first six months of 2023, the Nasdaq zoomed 31.7%, its best first half since 1983. The S&P 500 rallied nearly 16% for its best first six months since 2019 while the blue-chips gained 3.8%.
Much of Tech’s growth and the Nasdaq parabolic move has come from the AI boom on about 10 heavily weighted stocks. While it is a concern to some analysts, the bottom line has been bullish price action and a surprise to many market pundits.
Not us. We predicted a market breakout once we saw price action clear trading ranges that lasted from late March to mid-May. We further backed our thesis up when we talked about continued closes below 16 on the VIX being a very bullish setup for the market.
Speaking of the VIX, our low target was at 12.50 with last month’s 52-week low at 12.73. We weren’t off by that much and it remains to be seen if the bulls can recover this level this month with earnings season in focus. If so, the VIX could trade down towards the 11.50-11 area.
We will have more of an outlook on 2Q earnings next week but this is where the VIX could go if earnings are better-than-expected. As for this week, June’s employment report on Friday could provide some added volatility.
The key support levels we said to watch for last month were at: Nasdaq 13,500; S&P 4,350; and Dow 33,750. These remain areas to watch going forward. As far as possible market tops during earnings season this month and next: Dow 35,250-35,500; S&P 4,550-4,600; and Nasdaq 14,350-14,500.
The market is closed on Tuesday and today is a half day with Wall Street shutting down at 1pm (EST) for the July 4th holiday. We could have action today, but more likely on Wednesday. In any event, stay locked-and-loaded and enjoy the holiday in case we don’t chat before then.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 16-6 (73%). 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.
Walt Disney (DIS, $89.28, up $0.33)
DIS July 85 puts (DIS230721P00085000, $0.43, down $0.13)
Entry Price: $0.90 (6/21/2023)
Exit Target: $1.80
Return: -52%
Stop Target: None
Action: An analyst downgrade on Thursday pushed shares below key support at $87.50 with the options trading up to 95 cents. However, a rebound afterwards and the positive close was a disappointment.
Friday’s high reached $89.60 with lower resistance at $89.50-$89 getting topped but holding. Support is at $89-$88.50. A close above $90 could force an early exit.
Verizon (VZ, $37.19, up $0.20)
VZ July 38 calls (VZ230721C00038000, $0.13, up $0.02)
Entry Price: $0.40 (5/19/2023)
Exit Target: $0.80
Return: -68%
Stop Target: None
Action: Fresh and lower resistance at $37.25-$37.50 was kissed but held on the session high. Support is at $37-$36.75.