MomentumOptions.com Pre-Market Update for 12/14/2023
Dow Tags All-Time Peak
8:00am (EST)
Commentary
The stock market made another round of 52-week and all-time highs on Wednesday following news the Federal Reserve held interest rates steady. The news wasn’t much of a surprise as Wall Street had anticipated no action, and instead was more focused on possible rate cuts that are likely to come in 2024.
On that note, the minutes revealed Fed members have penciled in at least three quarter-percentage point rate cuts in 2024. Although this was less than the market’s pricing of four, the possibility of lower rates fueled higher highs for the major indexes.
The Nasdaq closed at 14,733 (+1.4%) after testing a high of 14,743. New and lower resistance at 14,600-14,750 was cleared and held. A move above the latter would imply ongoing strength to 14,850-15,000. Rising support is at 14,500-14,350.
The S&P 500 tagged a high of 4,709 before settling at 4,707 (+1.4%). Fresh and lower resistance at 4,700-4,750 was topped and held. A close above the latter would suggest momentum to 4,800-4,850 with the all-time high at 4,819 set on January 4th, 2022. Support is at 4,650-4,600.
The Dow finished at 37,090 (+1.4%) with the all-time intraday peak hitting 37,094. Undefined and lower resistance at 37,000-37,250 was cleared and held. A close above the latter would signal additional upside to 37,500-37,250. Rising support is at 36,750-36,500.
Volatility Index
The Volatility Index (VIX) tapped a low of 11.82 following yesterday’s 52-week low of 11.81. Key support at 12 was breached but held. Continued closes below this level would signal weakness to 11.75-11.50. Resistance is at 12.50-13 with stretch up to 14-14.25.
Thursday’s earnings announcements:
Before the open: Jabil (JBL), Live Ventures (LIVE), Yunji (YJ)
After the close: Costco Wholesale (COST), Lennar (LEN), RCI Hospitality Holdings (RICK), Scholastic (SCHL)
Economic news:
Initial Jobless Claims – 8:30am
Retail Sales – 8:30am
Business Inventories -10:00am
Market Thoughts
Monday and Tuesday’s higher highs in the major indexes and break out of the mini trading ranges were good clues the market would make a run at fresh 52-week and all-time peaks. The action into the closing bell was a solid signal there could be continued strength today and possibly into the weekend.
While this is great news for bullish traders, overbought conditions since mid-November remain in play. RSI (relative strength index) on the Dow closed at 83 with the Nasdaq at 74 and the S&P at 78. The fear of missing out, or the current FOMO rally, could continue the rest of the month and even into January, but at some point, a back-and-fill pattern and new support levels will be defined.
Of course, we have been preparing for a continued run towards key round numbers as we mentioned on Monday a breakout of the prior ranges could add another 3%-4% to the major indexes into yearend and January 2024.
These targets were at: Nasdaq 14,850-15,000; Dow 37,000-37,500; and S&P 4,750-4,800. These levels are now in play as we specifically said on Monday morning Powell’s comments could set the tone for how the final hour and the rest of the week might unfold.
The VIX also fell out of an extended trading range as we also mentioned continued closes below 12.50 would be very bullish for the market over the near-term. The biggest concern for the bulls, however, is that the chart is showing a possible near-term double bottom if a lower low isn’t made today or on Friday.
An early warning sign the market would be topping should occur with continued closes back above 13.50 on the VIX. A consolidation could occur for another month and into mid-January if selling pressure remains abated.
The biggest event from yesterday was the 3.5% surge in the Russell 2000. We have highlighting the more important hurdle to watch this month was at 1,900 and a level that was recovered. While this was very bullish, a triple top peak just above the 2,000 level could occur if this level isn’t cleared and held over the near-term. This is a story to watch during the back half of the month.
We have a couple of live trades on some very cheap options so we are basically in relax mood until 2024. However, we are always searching for trades and we are currently building an incredible Watch List for 2024 that could include new strategies such as strangles/ straddles/ and LEAPs.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 33-10 (77%). 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, $16.45, up $0.04)
T January 17 calls (T240119C00017000, $0.18, up $0.02)
Entry Price: $0.15 (12/12/2023)
Exit Target: $0.45
Return: 20%
Stop Target: None
Action: Shares have made a solid backtest towards $16.25 and key support with Wednesday’s low at $16.10. This level also represents prior resistance from late November. There is risk towards $16-$15.75 on a close below $16.25. Resistance is at $16.50-$16.75.
A golden cross is in the process of forming with the 50-day moving average on track to clear the 200-day moving average. This is technically a bullish signal for higher highs.
We felt this was a cheap way to play T and wind down the year while looking forward to 2024. Our most recent trade made 150% but was up 250%. The recent peak is at $17.34 with a return to this level easily getting us another triple-digit win. We think shares can trade up to $17.50-$18 by mid-January.
Open interest in these options is above 100,000 contracts and simply suggests shares could make a run towards $20. The 52-week peak is at $21.53. Fourth-quarter earnings aren’t due out until February with these options expiring before this event.
Transocean (RIG $5.96, up $0.26)
RIG January 5.50 puts (RIG240119P00005500, $0.17, down $0.07)
Entry Price: $0.20 (12/6/2023)
Exit Target: $0.40
Return: -15%
Stop Target: None
Action: Wednesday’s peak reached $5.98 with lower resistance at $5.75-$6
getting cleared and holding. Key support is at $5.50.