MomentumOptionsTrading.com Morning Update for 6/5/2014
All Aboard! S&P Clears 1,925
The bulls clear another layer of resistance as the market pushed fresh highs with the small-caps and Tech also recovering.
The Dow added 15 points, or 0.1%, to settle at 16,737. The blue-chips traded down to 16,673 shortly after the open but recovered and pushed 16,742. The index came within 14 points of its all-time intraday high of 16,756 and remains on track to test 16,800-17,000. Support remains 16,700-16,600.
The S&P 500 gained nearly 4 points, or 0.2%, to end at 1,927. The index touched a low of 1,918 but rebounded 10 points to push another all-time intraday high of 1,928.63. The close above 1,925 signals the bulls are serious at making a run at 1,950-1,960. The bears are hoping to get back below 1,925 but support is rising from 1,909 to 1,915.
The Nasdaq jumped 17 points, or 0.4%, to close at 4,251. Tech was also weak at the open as the index tested 4,216 but support at 4,200 has been a rock. The bulls made a run to 4,256 and held 4,250. Bingo. This clears the way for a rally to 4,300 and fresh 52-week peaks.
The Russell 2000 skipped 5 points higher, or 0.5%, to finish at 1,131. The small-caps traded to a low of 1,119 during the first 30 minutes and held the 200-day once again before clearing 1,130. The bulls have the 1,140 hurdle coming with 1,150 being the wall that must be climbed. The bears are shooting for 1,125-1,120 by the weekend.
The S&P 500 Volatility Index ($VIX, 12.08, up 0.21) continues its caterpillar crawl towards 12.50 after testing 12.33 on the open. I have said the VIX has room to 12.50-13.50 before Wall Street gets nervous. Today could be the day the bears make a stab at these levels while another close below 11.50 would be confirmation higher highs on the S&P are coming.
Side Note: I talked about Apple and its upcoming stock-split and the move shares can make ahead of the official split date. With the stock at $628 ahead of Tuesday’s open, they traded to a low of $628.25 and closed at $637. On Wednesday, shares reached $647.89 and closed just south of $645.
The July 700 calls (AAPL140719C00700000, $4.45, up $1.65) were going for $2.30 on Tuesday’s open and the Watch List has been a big hit. The July 700 calls doubled during Wednesday’s trading.
I mentioned for the traders that have the options trading manual, How to Trade Options on Momentum Stocks, I said to flip to page 109 to play the move ahead of the official split. I mentioned this on Sunday night and Monday morning.
As you can see from the Yahoo Finance quote below, these call options traded to a high of $5.35. This was not an official trade for the newsletter but for the experienced traders that have emailed me, yes, close half the trade at current levels. Let the rest ride with a stop limit at $3.
Heading from desk to press, futures look like this: Dow (+1); S&P 500 (-0.20); Nasdaq 100 (-1).