MomentumOptions.com Pre-Market Update for 10/9/2023
Jobs Report Surprises Wall Street
8:00am (EST)
Commentary
The stock market reversed opening losses to finish out the week on a high note following a stronger-than-expected jobs report. The US economy added 336,000 jobs in September, nearly double the 170,000 print that was expected.
The unemployment rate remained unchanged at 3.8% while wages rose 0.2% and below forecasts for a rise 0.3%. The labor force participation rate increase also remained unchanged at 62.8% as well as the average weekly hours which remained flat at 34.4.
The Nasdaq tagged a late day high of 13,472 while ending at 13,431 (+1.6%). Fresh and lower resistance at 13,350-13,500 was cleared and held. A close above the latter and the 50-day moving average would suggest upside towards 13,650-13,800. Support remains at 13,150-13,000.
The S&P 500 settled at 4,308 (+1.2%) with the peak reaching 4,324. Lower resistance at 4,300-4,350 was recovered. A move above the latter would imply strength to 4,400-4,450 and the 50-day moving average. Shaky support is at 4,250-4,200 and the 200-day moving average.
The Dow topped out at 33,557 before finishing at 33,407 (+0.9%). Prior and lower resistance at 33,500-33,750 was cleared but held. A pop above the latter and the 200-day moving average would be a more bullish development with additional hurdles at 34,000-34,250. Support is at 33,000-32,750.
Volatility Index
The Volatility Index (VIX) was down for the third-straight session despite the intraday pop to 20.88with the low kissing 17.19. Key support at 17.50 failed to hold with the close on the 200-day moving average. Resistance is at 19.50-20.
Monday’s earnings announcements:
Before the open: Applied Digital (APLD)
After the close: None
Economic News
None
Market Thoughts
The bulls accomplished a couple of major feats we wanted to see from last week with one of the most important being the close below 17.50 on the VIX. We talked about a possible retest towards the May 4th and 24th peaks at 21.33 and 20.81, respectively with last Wednesday’s high hitting 20.88. Tuesday’s top was at 20.48.
These “double-tops” on the VIX were perfect clues the market was ready to bounce after reaching oversold conditions. Friday’s close back below 17.50 was something we talked about heading into this week but more importantly, continued closes below 15 are still needed to ease some of the current volatility.
The RSI (relative strength index) levels for the Nasdaq, S&P, and Dow tested 35, 30, and nearly 25 on Wednesday’s intraday lows and are back in uptrends. If the Nasdaq can clear and hold 50 to start the week and show strength afterwards, the S&P (and likely the Dow with our fingers crossed) should also clear 50.
The Dow is only 30 stocks so we don’t view it in the same light as the other major indexes. The index is in the same boat as the small-caps with both below their 200-day moving averages and in worse technical shape than the Nasdaq and S&P. The Dow did set a fresh monthly low on Friday before rebounding with much of the weakness coming from McDonalds (MCD), Verizon (VZ) and Walmart (WMT) which all closed in the red but off the morning lows.
The Russell 2000 held major support at 1,700 throughout last week following a few dips below this level. This was another small battle the bulls won but all of the 50-day moving averages, in general for the major indexes, remain in nasty downtrends.
The start of the third-quarter earnings season gets underway this week with the Financial sector coming into focus on Friday and throughout next week. BlackRock (BLK), Citigroup (C), JPMorgan (JPM), PNC Financial (PNC) and Wells Fargo (WFC) will all announce numbers ahead of the open.
There are other notable companies reporting throughout this week but the fireworks will come during the back half of the month and when Tech earnings start to roll in. While the focus will be all about the profits and revenue, Wall Street will also want to hear fourth-quarter and yearend updates.
This week should be slightly less volatile than last with possible trading ranges continuing. The Nasdaq is showing signs of breaking out of a 12-session range and needs to clear and hold 13,500 to start the week. We mentioned closes above 13,650 and the 50-day moving average are more important and the bears will likely some resistance this week.
In short, we are watching the Nasdaq and the VIX into Friday’s earnings from the Financials with their results likely giving the bulls or bears the weekly win. As far as our current positions, we wanted to confirm last week’s possible bottom and why we were hesitant to take new or bearish positions. We still aren’t thrilled with taking overall bullish trades but there is a mix of stocks we like for possible options action.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 22-9 (71%). 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.
Ford Motor (F, $12.00, up $0.10)
F November 12 puts (F231103P00012000, $0.52, down $0.08)
Entry Price: $0.50 (10/3/2023)
Exit Target: $1.00
Return: 4%
Stop Target: None
Action: Shares traded down to $11.69 before closing with a slight gain while the puts peaked at 71 cents. Key support at $11.75 was tripped but held. Resistance is at $12.25-$12.50.
The 50-day moving average officially fell below the 200-day moving average to form a death-cross. This technical setup is typically a bearish signal for lower lows.
Petróleo Brasileiro (PBR, $14.09, up $0.31)
PBR October 16 calls (PBR231020C00016000, $0.04, unchanged)
Entry Price: $0.35 (9/14/2023)
Exit Target: $0.70
Return: -89%
Stop Target: None
Action: Fresh and lower resistance at $14-$14.25 was cleared and held with Friday’s high hitting $14.24. Continued closes above the latter and the 50-day moving average would be a renewed bullish signal. Support is at $13.75-$13.50.
Our last trade in PBR came down to the wire and this one is showing the same characteristics.