Market Update for 2/5

Bulls Extend Winning Streak to 3-Straight

5:00pm (EST)

The market was higher for the 3rd-straight session on Wednesday as private sector employment soared with additional better-than-expected economic news keeping the bullish sentiment intact. The reported number of coronavirus cases of the deadly disease continues to rise in China but didn’t dampen enthusiasm as the outbreak is still mainly contained to that country.

More importantly, there are reports of some success in treating the virus using existing drugs along with U.K. scientists reporting a significant breakthrough on a vaccine. The major indexes look poised for higher highs but volatility remains elevated and the pullback in Tech off the high was a slight concern going forward.

The Dow soared 1.7% with the late session high tapping 29,308. Prior and lower resistance at 29,000-29,200 was cleared and held with a move above the all-time high at 27,373 signaling additional strength towards 29,400-29,600.

The Russell 2000 rose 1.5% after testing a late day high of 1,682. Near-term and lower resistance at 1,670-1,685 was cleared and held with a close above the latter getting the 1,700 level back in focus.

The S&P 500 surged 1.1% following the afternoon run to 3,337 while missing a new all-time high by a quarter-point. Current resistance at 3,300-3,325 was cleared and held with upside potential towards 3,350-3,375 on continued closes above the 3,335 level.

The Nasdaq was up 0.4% after trading to a 2nd-straight all-time high of 9,574. Fresh and lower resistance at 9,550-9,600 was cleared but held with a move above the latter signaling momentum towards 9,650-9,700.

Energy led sector strength after zooming 3.8% while Healthcare and Financials rallied 2%. Real Estate was the only sector laggard after slipping 0.1%.

Virgin Galactic (SPCE) Calls Return 650%!

Virgin Galactic (SPCE, $17.21 down $1.91)

SPCE April 15 calls (SPCE200417C00015000, $4.80, down $0.70)

Entry Price: $0.50 (1/7/2019)

Exit Target: $7.50 (closed half at $2.50 on 1/15/2020)

Return: 650%

Stop Target: $5 (Stop Limit)

Action: The Stop Limit at $5 tripped on Friday’s continued weakness in the stock.

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Sector Outlook: Industrials Select Sector Spider (XLI)

The Industrials Select Sector Spider (XLI) was higher for the first time in 3 sessions despite kissing an intraday low of $81.18. Current and upper support at $81-$80.50 was challenged but held. A close below the latter and the 50-day moving average would be an ongoing bearish development with additional risk towards $79.50-$79 and the December low at $79.26.

Near-term and lowered resistance is at $82-$82.50. Continued closes above the latter and the recent all-time high of $82.66 would be a renewed bullish signal for a run towards $83.50-$84.

RSI has leveled out with support at 50. A move below this level would signal additional weakness towards 45-40 with the latter representing the early December bottom. Resistance is at 55-60. A move above the latter would signal additional strength towards 65-70.

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NextOptions.com Market Update for 1/2/2020

Bulls Close 2019 on a High Note

8:00am (EST)

The market traded on both sides of the ledger before finishing higher to wrap up the last trading day for 2019. News that President Trump will be signing the phase one trade deal with China on January 15th helped sentiment along with better-than-expected housing numbers.

The small-caps showed the most intraday strength as the dollar fell to a 6-month low with volatility easing going into the end of the week and to start 2020. The official Santa Claus rally that typically happens over the last 5 trading days of the year (and the first 2 of the new year) remains in play following Tuesday’s gains.

The Nasdaq was up for the 1st time in 3 sessions after adding 0.3% with the late session peak reaching 8,975. Lower resistance at 8,950-9,000 was cleared and held with a close above the latter signaling momentum towards 9,050-9,100 and fresh all-time highs.

The Russell 2000 snapped a 3-session slide after gaining 0.3% while trading to an afternoon high of 1,673. Prior and lower resistance at 1,670-1,685 was cleared and held with a close above the latter and the 52-week peak of 1,681 getting the 1,700 level back in focus.

The S&P 500 rebounded after advancing 0.3% and tapping an intraday high of 3,231. Near-term and lower resistance at 3,225-3,250 was cleared and held with a close above the latter and the all-time high of 3,247 getting 3,275-3,300 in focus.

The Dow was also up 0.3% after testing a second half high of 28,547. Current and lower resistance at 28,500-28,750 was cleared and held with a close above the latter and the lifetime high of 28,701 signaling a run towards the 29,000 level.

For 2019, the Nasdaq jumped 35% and the Russell 2000 soared 24%. The S&P 500 surged 28% and the Dow rallied 23%.

Materials and Real Estate were sector standouts after rising 0.7%. Industrials were the only sector laggard after slipping 0.1%. For 2019, all 11 of the S&P 500 sectors closed the year higher for the first time since 2010.

TWTR Calls Up 81%

Twitter (TWTR, $30.91, down $0.26)

TWTR January 30 calls (TWTR200117C00030000, $1.90, down $0.20)

Entry Price: $1.05 (11/15/2019)

Exit Target: $2.10

Return: 81%

Stop Target: $1.80 (Stop Limit)

Action: Upper support at $30.75-$30.50 held on Friday’s fade to $30.78. Resistance is at $31-$31.25.

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TLT Holds 50-Day MA

The iShares 20+ Year Treasury Bond ETF (TLT) was down for the 2nd-straight session after tapping a low of $139.78. Near-term and upper support at $140.50-$140 was breached and failed to hold. A close below the former and the 50-day moving average would be an ongoing bearish signal with downside risk towards $138.50-$138.

Current resistance from late October remains $141-$141.50.

RSI is in a downtrend with support at 55-50. A move below the latter would signal additional weakness towards 45-40. Resistance is at 60 and the November peak.

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