MomentumOptions.com Pre-Market Update for 1/4/2024
Market Showing Signs of Peaking
8:00am (EST)
Commentary
The stock pulled back on Wednesday with Tech falling for the fourth-straight session on heightened volatility. The current choppiness follows a strong December and a shortened week ahead of the start of the fourth-quarter earnings season.
The Nasdaq tested a low of 14,577 while ending at 14,592 (-1.2%). Fresh and upper support at 14,650-14,500 failed to hold. A drop below the latter would imply weakness to 14,350-14,200. Lowered resistance is at 14,700-14,850.
The S&P 500 closed at 4,704 (-0.8) with the intraday low at 4,699. Key support at 4,700 was tripped but held. Continued closes below this level and would indicate a backtest to 4,650-4,600. Resistance is at 4,750-4,800.
The Dow bottomed at 37,401 before settling at 37,430 (-0.8%). Upper support at 37,500-37,250 failed to hold. A fade below 37,000 would suggest a further slide to 36,750-36,500. Resistance is at 37,750-38,000.
Volatility Index
The Volatility Index (VIX) topped out at 14.22 with lower resistance at 14-14.50 getting cleared but holding. A pop above the latter and the 50-day moving average would suggest strength to 15.50-16 and the 200-day moving average. Support is at 13.50-13.
Thursday’s earnings announcements:
Before the open: Conagra Brands (CAG), RPM International (RPM), Walgreens Boots Alliance (WBA)
After the close: Franklin Covey (FC), Kura Sushi (KRUS)
Economic news:
Initial Jobless Claims – 8:30am
PMI Services Index – 9:45am
Market Thoughts
The typical Santa Claus rally did not materialize over the last five trading days of 2023 and the first two to start this year as the S&P fell roughly 1%. The Nasdaq and the Russell were also lower by more than 2%. The blue-chips were up 1% but the Dow is only made up of 30 stocks so this doesn’t help the bullish case.
Key support on the Nasdaq at 14,800 and the Russell 2000 at the 2,000 level failed to hold this week. The S&P held onto 4,700 by a thread while the Dow is currently holding 37,000. If the latter two levels fail to hold into the weekend, expect lower lows.
From 12/28:
“Going forwards, continued closes back below 2,000 would likely confirm a near-term top (for the Russell).
As for the other major indexes, key support levels to watch into yearend are at: Nasdaq 14,800; S&P 4,700; Dow 37,000. If these levels fail to hold, there is a good chance the ongoing two-month rally has topped out.”
We mentioned after Christmas that a pullback during the typical time period for a Santa Claus rally can sometimes signal upcoming weakness or even a bear market. We don’t think the latter will be in play this month, but we would wouldn’t be surprised if a bear market doesn’t come at some point during the first quarter.
We have been warning continued closes back above 13.50 on the VIX would be a bearish warning sign of a near-term market top. While we often say one-day doesn’t make a trend, continued closes above 15 would confirm our thesis the two-month rally has run its course.
Of course, the upcoming fourth-quarter earnings season will heavily favor the bulls or bears this month so the battle is just getting started. We will have more to say on Monday once the dust settles from this week’s action along with detailed technical analysis and a video.
In the meantime, let’s go check on our current trades.
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.
ProShares UltraPro Short QQQ (SQQQ, $14.59, up $0.45)
SQQQ February 16 calls (SQQQ240216C00016000, $0.65, up $0.15)
Entry Price: $0.60 (1/3/2024)
Exit Target: $1.20
Return: 8%
Stop Target: None
Action: Fresh and lower resistance at $14.50-$14.75 was cleared and held following the run to $14.65. Rising support is at $14.25-$14.
We are looking for a possible retest towards $16.50-$17 by mid-February and this is a way to play a bearish market. SQQQ typically rises when the QQQ’s or the Nasdaq retreat. If the latter price target is reached, we will hit either a high double-digit and possibly a triple-digit winner.
AT&T (T, $17.23, down $0.02)
T February 17 calls (T240216C00017000, $0.60, down $0.03)
Entry Price: $0.35 (12/27/2023)
Exit Target: $1.40
Return: 71%
Stop Target: 48 cents (Stop Limit)
Action: Key resistance at $17.25 was cleared but held with yesterday’s high at $17.38. Support is at $17-$16.75.
A golden cross formed in mid-December with the 50-day moving average closing above the 200-day moving average. This is typically a bullish signal for higher highs.
We got the retest to $17-$17.25 like we wanted over the near-term. Continued closes above $17.50 could lead to a possible breakout towards $19-$20.