MomentumOptions.com Pre-Market Update for 9/21/2023
Fed Holds Interest Rates Steady
8:00am (EST)
Commentary
The stock market pulled back on Wednesday after the Fed left interest rates unchanged. The central bank stated it still expects one more hike before yearend but fewer cuts than previously indicated next year.
Wall Street had mostly priced in the news but the selling pressure intensified into the close with volatility blowing past a key level of resistance.
The Nasdaq kissed a low of 13,467 before settling at 13,469 (-1.5%). Prior and upper support at 13,500-13,350 failed to hold. A move below the latter would indicate ongoing weakness to 13,250-13,100. Resistance is at 13,600-13,750.
The S&P 500 ended at 4,402 (-1.2%) after trading down to 4,401. Key support at 4,400 was challenged and held. A close below this level would suggest downside action towards 4,350-4,300. Resistance is at 4,450-4,500 and 50-day moving average.
The Dow bottomed at 34,434 while finishing at 34,440 (-0.2%). Upper support at 34,500-34,250 failed to hold. A drop below the latter would imply further weakness towards 34,000-33,750 and the 200-day moving average. Resistance is at 34,750-35,000 and the 50-day moving average.
Volatility Index
The Volatility Index (VIX) was up for the fourth-straight session following the trip to 15.15. Lower resistance at 15-15.50 was cleared and held. A close above the latter would indicate further strength towards 16.50-17. Support is at 14.75-14.25 and the 50-day moving average.
Thursday’s earnings announcements:
Before the open: Darden Restaurants (DRI), FactSet Research Systems (FDS), Valneva (VALN)
After the close: Flux Power Holdings (FLUX), Scholastic (SCHL)
Economic news:
Initial Jobless Claims – 8:30am
Philadelphia Fed Business Outlook Survey – 8:30am
Leading Indicators – 10:00am
Existing Home Sales – 10:00am
Market Thoughts
The RSI (relative strength index) levels for the major indexes are in a downtrend with the Nasdaq dropping below 40. The S&P is on the verge of falling below 40 with both indexes on track to test 35-30 and the August lows.
The Dow is in better shape with RSI at 44 but there is also a chance 40-35 comes into play on further weakness. As for a recovery, RSI levels need to get back above 50 before we can say another near-term market bottom is in.
The strength in the VIX has also given us a great clue of a near-term market top following last Friday’s intraday reversal off the 12.75 level. This week’s action and higher highs in the VIX confirmed the possible triple-bottom we highlighted coming into the week.
The fresh monthly lows on the S&P and the Nasdaq could be early indications that the August lows will come into play if there is ongoing weakness. The S&P hit 4,335 on August 18th while the Nasdaq tagged a low of 13,161 on the same day. Circle these numbers going forward.
The bears will try and keep the pressure on with a break below near-term support levels likely getting the bottom end of the recent zones we highlighted on 9/11. For new subscribers:
“Last Monday, we highlighted the battlefield and key support / resistance levels for the major indexes: Dow 34,000-35,000; Nasdaq 13,200-14,200; and S&P 4,350-4,550. A strong move below or above these levels will likely confirm the next major trend.”
Given the current action, it wouldn’t be too surprising to see the low end of these trading ranges coming into play over the near-term. From there, we will need to see if they hold, or if the bears will push a further selloff and possible market correction.
Momentum Options Play List
Closed Momentum Options Trades for 2023: 21-9 (70%). 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.
Snap (SNAP, $9.03, up $0.03)
SNAP October 9 puts (SNAP231020P00009000, $0.50, down $0.08)
Entry Price: $0.65 (9/19/2023)
Exit Target: $1.30
Return: -23%
Stop Target: None
Action: Lower resistance at $9.25-$9.50 was topped but held on the trip to $9.38. Support is at $8.75-$8.50. There is risk to $8.25-$8 if the latter fails to hold.
Petróleo Brasileiro (PBR, $15.33, up $0.05)
PBR October 16 calls (PBR231020C00016000, $0.30, down $0.05)
Entry Price: $0.35 (9/14/2023)
Exit Target: $0.70
Return: -14%
Stop Target: None
Action: Shares traded up to $15.55 with key resistance at $15.50 getting cleared but holding. Support is at $15.25-$15.
The 52-week peak is at $16.32 and we believe a push to $16.50-$17 could come on a breakout above $15.50.
Barrick Gold (GOLD, $16.42, up $0.09)
GOLD October 17 calls (GOLD231020C00017000, $0.30, up $0.05)
Entry Price: $0.45 (8/29/2023)
Exit Target: $0.90
Return: -33%
Stop Target: None
Action: Key resistance at $16.75 and the 50-day moving average were cleared but levels that held with the peak at $16.81. Support is at $16.25-$16.