Friday, August 1st, 2014
MomentumOptionsTrading.com Midday Update for 8/1/2014
Bears Breaking Bad
12:20 p.m. (EST)
Futures were volatile throughout the night and were higher ahead of the overseas market opening, but got progressively worse ahead of Wall Street’s open. Dow futures were down over triple-digits at one point, but made a dramatic turnaround following a weaker-than-expected Non-farm Payrolls number.
The drop to 209,000 jobs added came in worse-than-expected, but held the 200,000 level. The goldilocks number has the Fed debate on interest rates back in full gear, but I’ll save that rhetoric for another day.
The more important picture is in the charts, as the bears did do some serious technical damage on Thursday. The Dow and the S&P 500 are wrangling with their 100-day moving averages, while the Russell 2000 fell below its 200-day moving average. The Nasdaq has fallen below its 50-day moving average with today’s pullback.
I was up late doing chart work and research to figure out possible actions for next week. Needless to say, if there is no rebound today, there could be a new short-term trend developing.
August has historically been the worst month for the Dow and S&P 500 since the late 1990′s. Additionally, a second consecutive negative Friday close would add to the bearish outlook.
Heading into the second half of trading, the Dow is down 101 points to 16,461, while the S&P 500 is declining 12 points to 1,918. The Nasdaq is lower by 39 points to 4,330, and the Russell 2000 is dropping 12 points to 1,108. The VIX is up 0.47 to 17.42. I will be watching to see if the bulls can hold the 17.50 level into the close.
The stop limits on the current profitable trades are still holding and, while it is tempting to open a new position today, I usually shy away from doing so on Friday’s due to the weekend time decay. However, I do see a few trades I like and, if the selling pressure continues, I may send out a New Trade alert.
If the stop limits trigger on the current trades, I will also have additional room to open more new trades next week.
Stay locked-and-loaded into the close, but if you don’t hear from me, I will be back Sunday night with the Weekly Wrap and on Monday morning with the Daily. Until then, have a great weekend, everybody!
Friday, August 1st, 2014
MomentumOptionsTrading.com Morning Update for 8/1/2014
Goodbye July, Hello August
9:00 a.m. (EST)
The bears had their best outing since mid-April following an attack that left Wall Street speechless. Warnings signs have been showing up over the past few weeks, and I have talked about a “Whoa Nelly” event happening. Yesterday was that moment.
The Dow tanked 317 points, or 1.9%, to settle at its session low of 16,563 on Thursday. The blue-chips opened at 16,869 but fell below 16,800 within minutes. I have talked about additional support at 16,600, and this level was also tested. I have warned that a close below the second wave of support would be extremely bearish, and the elevator drop opened the door for a test to 16,300-16,250 on further weakness. A recovery back above 16,700-16,800 would be bullish heading into next week.
The S&P 500 stumbled 39 points, or 2%, to end at 1,930. The bears cracked 1,960 and then 1,950 within the first hour of trading. Additional support at 1,940 also failed in the final hour. If the bears had 10 more minutes yesterday, they likely would have triggered 1,925 — a level the bulls desperately need to hold today. If not, there could be a test to 1,900. Any 10-point gains to clear prior resistance levels would help ease some of Thursday’s pain.
The Nasdaq was hammered for 93 points, or 2.1%, to close at 4,369. Tech opened under 4,425 at 4,421, which was a clear signal that 4,400 would be breeched. I have talked about wiggle room down to 4,375-4,350, and Thursday’s low reached 4,367. The bulls will be looking to reclaim 4,375-4,400 ahead of the weekend, while the bears would obviously like to get under 4,350. Any dips below this level could lead to 4,325-4,300 quickly.
The Russell 2000 sank 26 points, or 2.3%, to finish at 1,120. The small-caps started the session below 1,140 after opening at 1,137, and that was a green light that a test to 1,125 would come. I have cautioned further weakness to 1,110-1,100 on a close below this level of support. The bulls will be looking to at least clear 1,125-1,130 by today’s closing bell and, while 1,140 would be nice, it would require a 2% rebound.
The S&P 500 Volatility Index ($VIX, 16.95, up 3.62) zoomed 27% after trading to a high of 17.11. If you flinched yesterday on the close above 15, that is understandable, as I said not to get nervous until the bears cleared this level. Naturally, the VIX got plenty of attention from the talking heads and, for those who said the index was dead, welcome back, Jack. The bulls managed to hold 17.50, but a close above this level could lead to 20-22. The bears will be trying to hold 15 heading into next week.
I have updated all of the current trades with my thoughts and instructions. Although it has been a shaky week for the market, the Daily portfolio has performed extremely well. Even better, by locking in profits on the winners, the portfolio is once again in fantastic position for new trades and the beginning of a possible new trend.
Special Notice: If this is the start of a 5%-10% pullback — please do not worry. The best time to make money is when the market is trending, up or down. Trading ranges are hard to navigate, and volatility can whipsaw you out of a lot of good trades, but I managed to avoid the pitfalls of July by sticking to the chart work and game plan.
The suit-and-ties will continue to tell you to stay out of the market, as many of them don’t know how to play a downslide slide. I love buying put options as much as call options, and the returns can be just as great. For new subscribers, check out some of the trades I recommended from 2008 when the market really folded like a cheap lawn chair. Again, don’t be nervous.
Overnight futures were showing a rebound going into this morning’s open. Nonfarm Payrolls came in worse than expected and futures are reacting accordingly.
From desk to press, futures look like this: Dow (-24); S&P 500 (-3); Nasdaq 100 (-1).
Thursday, July 31st, 2014
MomentumOptionsTrading.com Midday Update for 7/31/2014
Market In Danger of Finishing July Lower/ Profit Alerts (WWE/ RFMD)!!!
The bulls spent the first 3 days of the month pushing record highs and came into today’s session with the monthly lead. However, the bears have only needed a half-session to erase those gains following the tight trading range in between.
The action has been very reminiscent of May’s frustrating range but with a tad more volatility. The action has caused continued confusion on Wall Street as more and more pros say a “top” is in.
While they may be patting themselves on the back today after 7 months of being wrong, I’m not ready to join that crowd…yet. However, today’s action makes tomorrow’s Nonfarm Payrolls report that much more important as the bears have pushed the second layers of support.
I have given specific downside levels to possibility start fresh short positions by using index put options over the past 2 weeks. While it is tempting to throw fresh bait to the sharks, I have also talked about trading ranges getting “stretched” both to the upside and downside.
The possibility of a summer rally is still in play as the uptrends lines and and major moving averages continue to hold. Although volatility has been elevated in recent weeks, the S&P Volatility Index ($VIX, 14.96, up 1.63) has also stayed range bound and continues to be an excellent guide in navigating the current trading range.
The Dow came into the month at 16,826 while the S&P 500 started at 1,960. The Nasdaq was at 4,408 and the Russell 2000 ended June at 1,192.
Heading into the second half of trading, the Dow is dropping 184 points to 16,696 and the S&P 500 is tanking 25 points to 1,945. Tech is lower by 70 to 4,393 while the Russell 2000 is declining 17 points to 1,129.
As I mentioned earlier, tomorrow will be a big day as Nonfarm Payrolls will hit Wall Street ahead of the open. The suit-and-ties are expecting around 245,000-250,000 new jobs. Although this would be a decent number, it is a decline from last month’s surprise of 288,000 jobs created.
A better-than-expected report (over 290,000-300,000) would be very beneficial for the market as it would support this week’s Gross Domestic Product (GDP) numbers. A number south of 250,000 could start a new market trend heading into August.
If this is a short-term top in the market, there will be a ton of opportunities to make money by using put options. However, it is important to wait for all of the stars to align before doing so. Today’s action is spooky but the market has seen this horror show before.
I have a number of updates for the Daily portfolio, including 3 juicy Profit Alerts. I could also have additional updates later in the day and into the close so stay locked-and-loaded in what will be a busy and possibly hectic rest of the session.
Thursday, July 31st, 2014
MomentumOptionsTrading.com Morning Update for 7/31/2014
Bulls Rebound on Fed’s Comments
The market was volatile Wednesday but bounced off its lows after the zombies cut another $10 billion from their monthly bond buying spree while keeping interest rates unchanged.
Of course, the tight trading range over the past 3 weeks could continue today as Wall Street awaits Friday’s Nonfarm Payroll numbers. (read more…)
Wednesday, July 30th, 2014
MomentumOptionsTrading.com Midday Update for 7/30/2014
Twitter (TWTR) Zooms on Earnings Beat/ Update on US Steel (X)/ New Trade!!!
Twitter (TWTR, $46.79, up $8.20) sent the shorts sellers of its stock running for cover as shares are surging 21% today following an earnings beat-and-raise quarter.
The naysayers that say said shares were headed back to the lows $30′s or that the company’s business model needed “tweaking” are now having second thoughts.
The company reported a profit of 2cents a share on revenue of $312 million. The suit-and-ties were expecting a loss for a penny a share on revenue of $283 million. Obviously, Wall Street’s expectations were too low and pessimism was too high.
I have chronicled Twitter’s fall from grace following the 52-week high just south of $75 to the May low to under $30. I recommended the January 50 calls (TWTR150117C00050000, $4.70, up $2.85) back in early May at $1.75 and the trade made 28% by mid-June after closing the trade for an average price of $2.20. They are up over 150%. Unfortunately, I didn’t keep them on my Watch List as these options were back near the original price point. However, shares were at $32 and not $38 so the risk parameters were much higher going into earnings.
Twitter may be complicated to use to some, quirky for others, or a non-factor in most people lives. I have talked about their brand name and news feed (tweeting) being a global force and the earnings surprise was just what the bulls needed.
Elsewhere, shares of United States Steel (X, $32.80, up $5.13) are soaring nearly 20% after reporting a smaller-than-expected loss. I talked about Wall Street’s expectations coming into the quarter and the wide range analysts had but the bigger news is what the options are doing.
The US Steel September 30 calls (X140920C00030000, $3.40, up $2.80) are up a jaw-dropping 467%.
Heading into the second half of trading, the Dow is down double-nickels to 16,856 while the S&P 500 is lower by 3 points to 1,966. The Nasdaq is higher by 9 points to 4,451 while the Russell 2000 is up a point to 1,143.
I have another New Trade for today on a stock that is no stranger to the portfolio. I recommended call options in early February that returned readers over 200% in 3 weeks. I’m looking to pull another rabbit or two out of the hat as I’m also looking at a longer-term trade for the Weekly Wrap as well.
Subscribers, hit the Members Area for the updates and New Trade.
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