The Wagner Daily – Ugly Reversal Day in S&P 500

The Wagner Daily – May 11, 2021

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MTG Timing Model – S&P 500 buy, Nasdaq Composite sell

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:

An ugly reversal day in the S&P 500 and in leading stocks could lead to further weakness if the 20-day EMA does not hold. If the S&P is in a rising channel with tight swings, then low-risk buy points off support should work better than buying breakouts (in individual names).  

The Nasdaq’s break of the 50-day MA on volume is a concern, as price action can turn ugly in a hurry when below the 50ma. Anything can happen price-action-wise, but the odds have increased for further weakness.

Our main concern right now is the S&P 500 and current leadership. Where will money flow if $XLF, $XLB, $IYT, and $NAIL are too extended and in need of 2-3 weeks of rest and the S&P 500 loses the 20-day EMA? Anything can happen, but we doubt back into growth, as there are no clear signs of industry group strength there.

Given the sharp reversal action in $CLF and $FCX, we are forced to play defense and preserve some gains. Not ideal, but we are not in an A+ rally with growth stocks leading the way.

Note that we have break-even stops on half the position in energy trades $XOP and $XEC. The stops on the remaining half positions are beneath the 2-day low.

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

• None – After Monday’s reversal action, there isn’t much out there in terms of actionable setups.

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