MomentumOptions.com Pre-Market Update for 10/25/2022
S&P Tags Monthly High
8:00am (EST)
The stock market showed continued strength on Monday with the S&P tagging a fresh monthly high while the Dow reclaimed its 50-day moving average. Despite the gains, volatility stayed elevated throughout the session with key resistance holding into the closing bell.
The Dow traded to a high of 31,603 while settling at 31,499 (+1.3%). Lower resistance from early September at 31,500-31,750 was cleared but held by a half-point. A pop above the latter would be an ongoing bullish development for upside to 32,000-32,250.
The S&P 500 ended at 3,797 (+1.2%) after making a run to 3,810. Key resistance at 3,800 was topped but held. Continued closes above this level would suggest additional strength towards 3,825-3,850.
The Nasdaq went out at 10,952 with the intraday peak reaching 10,983 (+0.9%). Near-term and key resistance at 11,000 was challenged but held. A close above this level would indicate possible momentum to 11,100-11,250 with the October high at 11,230.
The Russell 2000 settled at 1,748 (+0.4%) following the late day push to 1,751. Key resistance at 1,750 was cleared but held. Continued closes above this level would signal additional gains towards 1,775-1,800 and the 50-day moving average. Below is a chart of the IWM.
Volatility Index
The Volatility Index (VIX) was up for the first time in three sessions after touching a high of 30.95. Lower resistance at 30.50-31 was cleared but held. A pop above the latter and the 20-day moving average would indicate a retest towards 32-32.50.
Support is at 29.50-29.
Market Analysis
The Spider Small-Cap 600 ETF (SLY) was up for the second-straight session after testing a high of $80.96. Near-term and lower resistance at $80.50-$81 was recovered. A move above the latter would indicate upside action towards $82-$82.50 and the 50-day moving average.
Support is at $79.50-$79.
RSI (relative strength indicator) is in an uptrend with key resistance from late August at 55 holding. A close above this level would suggest strength to 60-65. Support is at 50-45.
Sector
The Dow Jones Transportation Average (TRAN) showed strength for the second-straight session following the trip to 13,099. Key resistance at 13,000 was reclaimed. Continued closes above this level would be a bullish signal for a gap refill towards 13,350-13,500 and the 50-day moving average.
Support is at 12,900-12,750.
RSI remains in an uptrend after clearing key resistance at 50. Continued closes above this level would indicate strength towards 55-60 and levels from late August. Support is at 50-45.
Market Outlook
The 20-day moving averages for the major indexes are all curling higher with key resistance from the beginning of the month and late last month also in play. With the S&P joining the Dow in making higher highs, there is reason to believe Tech and the small-caps will follow suit.
The aforementioned chart of the Transports shows a gap to fill up to 13,500. A breakout to prior support would be bullish for the Dow as it tends to mirror price action.
As far as volatility, the 20-day moving average has rolled over on the VIX although the 50-day and 200-day moving averages remain in uptrends. There is stretch on the VIX up to 32.50, if 30 fails to hold, with a close above this level indicating when we need to be cautious again.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 24-18 (57%). 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.
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KraneShares CSI China Internet ETF (KWEB, $18.41, down $3.04)
KWEB November 24 calls (KWEB221118C00024000, $0.20, down $0.45)
Entry Price: $0.58 (10/21/2022)
Exit Target: $1.20
Return: -62%
Stop Target: None
Action: Shares plunged to a fresh 52-week low of $17.22 with new and upper support at $17.25-$17 getting breached but holding. Lowered resistance is at $18.50-$19.
I’m not sure if yesterday was a capitulation moment for the Chinese internet stocks but it felt like it. This is obviously not how I wanted the trade to start off but let’s see how the rest of the week unfolds.
Rocket Companies (RKT, $6.36, up $0.04)
RKT December 8 calls (RKT221216C00008000, $0.25, unchanged)
Entry Price: $0.95 (9/9/2022)
Exit Target: $1.90
Return: -74%
Stop Target: None
Action: Monday’s high kissed $6.44 with lower resistance at $6.50-$6.75 easily holding. Support is at $6.25-$6.
Diana Shipping (DSX, $4.23, up $0.06)
DSX December 6 calls (DSX221216C00006000, $0.10, unchanged)
Entry Price: $0.40 (8/18/2022)
Exit Target: $1.00
Return: -75%
Stop Target: None
Action: Lower resistance at $4.20-$4.30 was cleared and held following the push to $4.25. Support is at $4.10-$4 and the 20-day moving average.