MomentumOptions.com Pre-Market Update for 1/22/2024
S&P Finally Clears Previous All-Time High
8:00am (EST)
Commentary
The stock market broke out to fresh all-time and 52-week highs on Friday following better-than-expected economic news. Specifically, the University of Michigan’s consumer sentiment gauge surged to 78.8 for January, the highest level since July 2021.
More importantly, year-ahead inflation expectations softened to 2.9%, the lowest in over three years. Wall Street took this as a clear sign the Fed has more breathing room to loosen monetary policy and went on a buying spree.
The Nasdaq settled on its session and 52-week peak at 15,310 (+1.7%). Fresh and lower resistance at 15,300-15,450 was cleared and held. A close above the latter would imply upside towards 15,600-15,750. Rising support is at 15,150-15,000.
The S&P 500 closed at 4,839 (+1.2%) after tagging a late day all-time high of 4,842. New and lower resistance at 4,825-4,875 was cleared and held. A pop above the latter and the all-time high at 4,819 from January 4th 2022 would suggest a possible breakout to 4,850-4,900. Support is at 4,750-4,700.
The Dow tagged an afternoon and lifetime of 37,993 while finishing at 37,863 (+1.1%). Key resistance at 37,750 was topped and held. Continued closes close above this level keeps 38,000-38,250 in play. Support remains at 37,500-37,250.
Volatility Index
The Volatility Index (VIX) was down for the second-straight day with the low at 13.28. Lower resistance at 13.50-13 was tripped and held. A drop below the latter would be an ongoing bullish development for the market. Lowered resistance is at 14-14.50.
Monday’s earnings announcements:
Before the open: Bank of Hawaii (BOH)
After the close: Agilysys (AGYS), Home Bancorp (HBCP), RBB Bancorp (RBB), United Airlines (UAL)
Economic News
None
Market Thoughts
The S&P, and the Dow to a degree, broke out of their five-week trading ranges on Friday with the Nasdaq also showing a bullish breakout. The Russell, on the other hand, closed just below 1,950 and a level we identified as a key battleground coming into last week.
The Russell did trade below 1,900 and key support last Wednesday and has lagged the other major indexes. While this doesn’t seem to a big deal at the moment, we would like to a broadening rally include the small-caps.
We were incredibly accurate in predicting much of the market’s action in 2023 and where the major indexes were headed during bullish and bearish times. We had a pretty good feeling the prior all-time highs would come into play after the bounce off of the October lows and had this to say to close out last month:
From 12/28:
“If we add another 1%-2% to our prior price targets for the major indexes, we could see Nasdaq 15,150-15,300; Dow 38,000-38,250; and S&P 4,850-4,900 at some point to close out 2023 or in January.”
The Nasdaq is roughly 4% away from its all-time high north of 16,000 after holding key support at 14,800 last Wednesday. We often say one day doesn’t make a trend and we mentioned Thursday’s morning, higher highs could still be in play.
If the Nasdaq does make a run towards 16,000, it could be a rising tide that lifts all boats. If this were the case, we could see Dow 40,000 and S&P 5,000 – at some point in 2024.
With that said, we were also correct in predicting last summer’s market peak which we said would concur with Apple’s (AAPL) earnings announcement at the beginning of last August. If you look at the charts, you will see all of the major indexes faded before making a weak v-shape recovery by month’s end.
Apple is scheduled to report earnings on February 1st and their results could once again help, or hinder, the current market momentum.
As for the VIX, it held key resistance at 15 and the 200-day moving average on Wednesday’s market pullback. When the bears failed to follow thru on Thursday, it represented the perfect backdrop for Friday’s breakout rally.
There will likely be continued momentum this week if there is follow thru on Monday. Typically, up Friday’s and up Monday’s can indicate money is flowing into the market. Mixed up and down Friday’s tend to lead to trading ranges. Down Friday’s and Monday’s can sometimes signal cash is moving to the sidelines.
We don’t like trading during rangebound markets unless we are selling options and collecting premium. Dividends are also nice. If the bulls can keep momentum, we could issue some fresh directional trades.
We have AT&T in play this week, and possibly the other position closing. We will likely use March options for our next setups as the regular February options expire in a little over three weeks.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 1-0 (100%). 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 we list one. We will send out a “Profit Alert” or “New Trade” if we 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.
AT&T (T, $16.67, up $0.27)
T February 18 calls (T240216C00018000, $0.12, up $0.03)
Entry Price: $0.26 (1/5/2024)
Exit Target: $0.75
Return: -54%
Stop Target: None
Action: Lower resistance at $16.75-$17 was topped but held with the high at $16.78. Support is at $16.50-$16.25 and the 50-day moving average.
Earnings are due out Wednesday before the open. A pop above $17 on good results will keep,us bullish on this trade. A close below $16 on disappointing news could force us out of the position.
ProShares UltraPro Short QQQ (SQQQ, $12.38, down $0.77)
SQQQ February 16 calls (SQQQ240216C00016000, $0.11, down $0.08)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: -82%
Stop Target: None
Action: Fresh and upper support at $12.50-$12.25 failed to hold following the plunge to $12.37. Lowered resistance is at $12.75-$13.
We will likely close this trade early as there are now several layers of resistance to overcome before these options expire. Let’s see where the action is at on Thursday.