MomentumOptionsTrading.com Morning Update for 6/10/2014
Dow/ S&P 500 Continue Ride Higher
The blue-chips traded higher for the fourth straight session and 7 of the past 8 while the S&P 500 has moved higher 11-out-of-13. I mentioned the fund-managers would be chasing the gains on a breakout after the Memorial Day holiday. This week could see a continued push higher as round number resistance is tested but too many cheerleaders may ruin a good thing.
The Dow added 19 points, or 0.1%, to close at 16,943. The blue-chips traded to an all-time high of 16,970 and is within spitting distance of clearing 17,000. There was a slight dip to 16,912 shortly after 2pm but there could be a push to 17,250-17,300 on an overshoot past 17,000. Support is at 16,800 but is fresh with solid backup at 16,600.
The S&P 500 gained 2 points, or 0.1%, to settle at 1,951. The index traded to another all-time intraday high of 1955 and double-nickels (0.55) and is on track to test 1,975-2,000. The bears pushed a late day low of 1,947 but it was short-lived. I mentioned I had the highest yearend price target for the S&P 500 at 2,100 out of a dozen Wall Street firms and many of them are now playing catchup as water-cooler talk of 2,000 continues. These knuckleheads jumped off the Titanic too soon and now they want back on board. This worries me for now but I’m enjoying the wave. I will talk more about this over the weekend. Support is at 1,940-1,925.
The Nasdaq advanced 15 points, or 0.3%, to end at 4,336. Tech zoomed to a high of 4,346 and is within a 1% striking distance of clearing its 52-week high of 4,371.71. Support has moved up to 4,300-4,250.
The Russell 2000 jumped 10 points, or 0.9%, to finish at 1,175.88. The small-caps traded higher from start to finish and reached a peak of 1,179.84. The close above 1,175 gets 1,200 in play again. Support is at 1,160-1,150.
The S&P 500 Volatility ($VIX, 11.15, up 0.42) tested a high of 11.51 and I mentioned the bulls were safe up to 11.50, and possibly 12.50 on a stretch. The BEST misconception of the VIX I heard by one of the slick talking pros yesterday was that the VIX was at “historic lows” and it was time to put some cash on the sidelines. This is WRONG as historic lows for the VIX are in the SINGLE-DIGITS. This is another 10+% drop in the index from current levels. More this weekend.
I mentioned all the time trading ranges usually lead to big breakouts or breakdowns in a stock or an index. After the tightest range for May in years, the bulls won the tug-of-war. I mentioned a rally would last through mid-June and I called for an all aboard headline to new all-time highs. I also played some soothing office tunes on the May Friday’s to keep everyone focused.
I still hope the mid-June prediction comes through and maybe more but I mentioned next week is June option expiration. This makes me a little nervous but could be ignored as traders battle over strike prices.
The final leg of the Dow Theory I talked about in November and December could also be playing out. For new subscribers, check out the past issues from those months for a quick update but I will talk more about this over weekend as well.
With my December (and March) fluff targets starting to trigger across the boards, I also want to take half or full profits when I can this week. The other halves and open trades can roll into next week.
From there, the portfolio will be light again as I look ahead to July, August, and September to open the next batch of new trades.
Tuesday’s have been bullish for much of the year but there was a little dip last Tuesday. Two-in-a-row would need to be watched.
From desk to press, futures look like this: Dow (-16); S&P 500 (-3); Nasdaq 100 (-4).