MomentumOptions.com Pre-Market Update for 1/8/2024
Bears Make an Appearance
8:00am (EST)
Commentary
The stock market showed some strength on Friday but the gains weren’t enough for the bulls to keep their nine-week winning streak intact. The bears did push lower intraday lows for the week after a higher-then-expected jobs report showed the economy added 216,000 jobs in December. Forecasts were at 175,000.
The Nasdaq settled at 14,524 (+0.1%) with the high at 14,625. Prior and lower resistance from mid-December at 14,600-14,750 was cleared but held. A pop above the latter would suggest a retest towards 14,850-15,000. Support is at 14,500-14,350.
The S&P 500 traded up to 4,721 while ending at 4,697 (+0.2%). Key resistance at 4,700 was topped but held. Continued closes back above this level would signal another run to 4,750-4,800. Support is at 4,650-4,600.
The Dow closed at 37,466 (+0.1%) after topping out at 37,623. Lower resistance at 37,500-37,750 was cleared but held. A move above the latter and last week’s all-time peak at 37,790 gets 38,000 back in focus. Support is at 37,250-37,000.
Volatility Index
The Volatility Index (VIX) tested a high at 14.58 with lower resistance at 14.50-15 getting cleared but holding. A close above the latter and the 50-day moving average would imply upside risk to 15.50-16 and the 200-day moving average. Support is at 13-12.50.
Monday’s earnings announcements:
Before the open: Commercial Metals Company (CMC), Helen of Troy (HELE)
After the close: Accolade (ACCD), Jefferies Financial Group (JEF)
Economic News
Consumer Credit – 3:00pm
Market Thoughts
The bears finally got a weekly win, their first in over two months, as a near-term market top was likely confirmed. The Dow was only down less than 1%, or 223 points, but the S&P fell nearly 2%, or 72 points. The Nasdaq tumbled 487 points, or well over 3%, and the Russell sank 76 points, or nearly 4%.
However, this doesn’t mean 52-week or all-time highs are totally out of the picture as we mentioned last week the upcoming fourth-quarter earnings season was right around the corner. What it does mean for the bulls is that prior resistance levels are in play and sometimes they hold for weeks, or even months.
Earnings season kicks off this Friday with reports from the Financial sector getting the ball rolling. Citigroup (C), JPMorgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) will announce numbers ahead of the open. BlackRock (BLK) and Delta Air Lines (DAL) are also on deck.
An important development over the weekend that could weigh on the blue-chips to start the week was news that the Federal Aviation Administration ordered the airlines carriers to ground more than 170 Boeing 737’s for inspections. This came after an Alaska Airlines flight made an emergency landing due to a panel on the side of the plane blowing off…mid-flight.
Shares broke down last Tuesday after forming a tight trading range and hitting a 52-week peak just north of $267. Boeing makes up over 4% of the Dow’s weight but could see lower lows if $245 fails to hold.
Key support levels on the S&P at 4,700 and the Dow at 37,000 held into Friday’s close and levels to again watch this week. The Nasdaq failed to hold 14,800 and is now struggling to clear and recover 14,600. There is some wiggle room to 14,400-14,350 for the index with a close below these levels likely signaling additional selling pressure.
The Russell 2000 is once again trapped between 1,900-2,000 after finishing Friday at 1,951. Continued closes below 1,950 and the 50-day moving average would be an ongoing bearish development for the small-caps, and possibly the overall market.
The VIX closed back below 13.50 on Friday and a battleground we highlighted coming into 2024. As a reminder, we said continued closes above 15 would confirm our thesis the two-month rally has run its course. Closes back below 12.50 this week would be a bullish case for the market.
We have gotten off to a great start for 2024 but we want to be a little patient in getting too aggressive with bearish positions and defensive plays. We do expect volatility to pick up in the next week, or two, so stay locked-and-loaded as we wait for our opportunities.
Momentum Options Play List
Closed Momentum Options Trades for 2024: 0-0 (0%). 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, $17.47, up $0.32)
T February 18 calls (T240216C00018000, $0.28, up $0.07)
Entry Price: $0.26 (1/5/2024)
Exit Target: $0.75
Return: 8%
Stop Target: None
T February 17 calls (T240216C00017000, $0.75, up $0.17)
Entry Price: $0.35 (12/27/2023)
Exit Target: $1.40
Return: 114%
Stop Target: 48 cents, raise to 63 cents (Stop Limit)
Action: Raise the Exit Target on the T February 17 to 63 cents, from 48 cents, to further protect profits.
A dividend payout of 27 cents could cause some weakness today. If we are stopped out, we have a “free” trade with the T February 18 as the profit from the T February 17 pays for the “piggy-back” trade.
Key resistance at $17.25 was cleared and finally held with Friday’s peak hitting $17.51. Support is at $17-$16.75.
ProShares UltraPro Short QQQ (SQQQ, $14.80, down $0.04)
SQQQ February 16 calls (SQQQ240216C00016000, $0.65, down $0.05)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: 8%
Stop Target: None
Action: Key resistance at $15 was challenged and held with the intraday high reaching $14.96. Support is at $14.50-$14.25.