The Wagner Daily – May 16, 2022
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MTG Market Timing Model – Sell due to both the S&P 500 and Nadsaq Comp below the 20 and 50-day MAs
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):
closed positions:
position notes:
- No trades triggered.
Last Friday’s report mentioned the potential for a short-term bounce as Thursday’s long upper wick in the S&P 500 and Nasdaq was a sign of the bears losing control. This signal was confirmed by a higher open and follow through to the upside on Friday. We can expect higher prices in the short term, but this strength should eventually give way to longer-term weakness.
Monday will be day three of a new rally attempt, so Tuesday’s day four would be the earliest we could see a follow-through day (FTD) print. However, the FTD is a mechanical signal that must be confirmed by strength in stocks, and from our scans, we can see that there isn’t much out there.
Rather than rely on an FTD, we can wait for the S&P 500 to reclaim the 20-day EMA and hold as a buy signal.
For the Nasdaq to reclaim the 20-day ema, it will also have to clear the downtrend line and take back the prior range low.
Just a reminder that we are not here to predict market action and know that anything can happen. The Nasdaq may bounce for another day and then sell off again, only to find a higher low. That low could lead to a multi-week bounce.
$AAPL has held up well this year but recently cracked a major support level. Can it reclaim the 20-day EMA?
While the S&P 500 and Nasdaq have just broken range lows, growth-based ETFs $FFTY, $ARKK, and $IWP were extended from the 20 and 50-day MAs and due for a bounce. Although relative strength near 52-week highs is a great concept for finding the next leader, these stocks typically struggle to move when the market eventually bounces, unless the market has truly bottomed out.
$LLY shows great relative strength holding above a rising 50ma during a bear market. While this stock may be able to move higher if there is a decent bounce in the market we can’t expect too much out of this setup. Not an official trade.
$LNTH is in base mode after an explosive +100% move in a few weeks and setting up as a power play. A power play occurs when a stock advances 100% or more in 8 weeks or less, followed by a consolidation of a few weeks that retraces no more than 20-25% of the last rally. The pullback here was shallow at 21% off the high. We’d like to see the action tighten up a bit more to produce a decent entry.
Energy stocks remain strong, but these stocks are best entered after a shakeout below the 20ema or 50ma and not near an obvious high as most breakouts fail within a few days.
Our short-term plan is to sit in cash and wait for short setups to emerge. If the S&P 500 or Nasdaq reclaims the 20-day EMA and holds, then we will look to the long side for starter positions.
Unofficial Setups – For experienced traders only, no guidance is given for these setups.
- Longs – just watching $CC $LLY $SJM $DG $DLTR $LNTH $SO $BPT $SJT $BMY
- Shorts – need a small bounce or few days of chop to produce new short setups
See you in the chat room,
Rick
This list is a good starting point for monitoring the health of the market for those who have limited time.
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