The Wagner Daily – $QQQ Weekly Chart; S&P False Breakout

The Wagner Daily – January 6, 2022

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MTG Market Timing Model – sell warning for S&P 500, sell for Nasdaq 

Our timing model was designed to keep our trades in line with the prevailing market trend, not to call tops or catch bottoms in S&P 500 or Nasdaq Composite.

today’s watchlist (potential trade entries):

open positions:

closed positions:

position notes:

• Per intraday alert, sold 1/2 of $MU for a 6% gain and stopped out of the other half for +3%.

Commentary:

In last night’s report, we discussed the outside day action in the Nasdaq Composite and how the next move in either direction would be key. On Wednesday, the Nasdaq Composite broke Tuesday’s low and plunged -3.3% lower.  Quite the nasty break of the 50-day MA!

The daily chart of $QQQ shows support from prior lows around $378. The 100-day EMA which is close to the 20-week EMA is around $381.

The weekly chart of $QQQ has held the 20-week EMA on a closing basis during the entire rally. Will we see a change in character this month?

January 6, 2022

And just like that, the S&P 500 has turned into a false breakout.  A close of 1% or more below the 21-day EMA would trigger a sell signal.  

Like the weekly of $QQQ, the 20-week EMA has provided support the entire rally but is stil 2.5% away.

With growth taking a beating, $XLK and $SMH assumed leadership in the last two months of 2020.  Money flowed into big cap tech such as $QCOM, $AMD, $AMAT, $MU, and $NVDA. On Wednesday, semiconductors lost two big-time leaders with $AMD and $NVDA breaking down below the 50-day MA. The others may soon follow.

Nasdaq 100 leadership is breaking down as well with $MSFT and $GOOGL slicing through the 50-day MA. $AAPL is at the 20-day EMA for now but looks vulnerable down to the swing low around $168.

There are no new setups for Thursday. Going long isn’t an option and the reward to risk ratios on most shorts are not favorable after Wednesday’s brutal selloff. Having said that, there may be one or two short setups in play for aggressive traders.

$LRCX may be in play on a slight bounce with the 20-day EMA as resistance. using a 5 or 15-minute chart to monitor the action.  The target would be a test of the swing low or 50-day MA, whichever comes first.  This is not an official setup.

For now, cash is king.  

Unofficial Setups – For experienced traders only, no guidance is given for these setups.

• none

See you in the chat room,

Rick

For those new to this report, our share size is pretty conservative with max. size around 10% of equity per trade. We do this because we prefer to trade 10-12 names to keep the report active.  However, if your goal is to maximize returns, taking 18-25% positions is the way to go.   If trading in a non-margin account, this will limit the portfolio to 4-5 positions.  If on margin, then 8-10 positions. Our risk per trade on average is just over 1/2 of 1%. Experienced traders may want to risk 1% to 2% per trade.   For example, a 20% position in a 100k account with a 6% stop loss would result in a $1,200 loss (1.2%). 

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