The Wagner Daily – Stocks in Trouble: S&P Thin, $IWM Below Support

The Wagner Daily – January 19, 2022

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MTG Market Timing Model – Buy (though both SP 500 & Nasdaq are on standby for a sell signal)  

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:

• No trades triggered

Commentary:

Market conditions continue to deteriorate with the Nasdaq Composite breaking down below its 200-day MA. The S&P 500 closed below the 100-day EMA and now has a lower high and lower low in place on the daily chart (trend reversal).

$DIA lost the 50-day MA and 100-day EMA. Small-cap Rusell 2000 ETF $IWM closed below a big support level in the $207-210 area.

S&P 500 leadership is beginning to thin out with financials taking a beating the past few days.

$BAC (below), $GS, and $MS are a few examples of ugly selling.

Energy has provided leadership but $XLE is extended in the short-term and may be due for a reversal.

The model portfolio is 100% in cash after covering shorts last Friday.

Due to the recent weakness in the market, there are very few short setups remaining near a low-risk entry point. We do have a few unofficial short setups below.

$TSLA is potentially in play as a short beneath the two-day low after stalling at the 50-day MA.  These are not optimal shorts as they haven’t sold off with the market but could be in play for a quick trade if conditions remain weak. 

$XPEV in the same group is also in play beneath the two-day low which would also crack the 50-day MA.

There are no new official setups for Wednesday. There isn’t much to do on the short side for a swing as most entries at this point are more of daytrade. As for the long side, our system is in sell mode and there are very few bullish patterns out there. $LYV held up on Tuesday and could be in play on Wednesday if the market reverses higher.  

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

• $MU (break 20ema) $ON (break 50ma)

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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