The Wagner Daily – Energy ETF Fails to Follow Through

The Wagner Daily – May 24, 2021

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MTG Market Timing Model – S&P 500 sell, 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:

• Per intraday alert, bought a starter position in $RBLX.

Commentary:

The weekly chart of the S&P 500 points to an uptrend losing steam with a hanging man candle at the highs and a lower close last week. A hanging man candle signals the potential for a trend reversal. Bulls were back in control by the close of the week, but there was quite a bit of selling during the week to create the long wick (trend losing steam). A hanging man must be confirmed by further weakness and should be ignored within the first few weeks of a strong breakout.

The weekly charts of sector ETFs $XLF (financials), $XLB (materials), and $IYT (transports) also have a hanging man followed by a lower close last week. If these leading sectors begin to sell off the S&P 500 will likely follow.

During the past two weeks, money appears to be rotating out of extended S&P 500 names and into semiconductors and software. We’d certainly like to see more participation and that would likely take some time as there just aren’t enough bullish charts/groups out there right now.

The Nasdaq Composite continues to hold the 20-week EMA, which is a positive but still has some work to do.

A few weeks ago, we positioned the model portfolio in energy ETF $XOP which failed to follow through and stopped us out with a small loss. Pullback and breakout entries have only led to chop. Tough to make any money unless one bought the downtrend line break.

Commodity-based stocks have had a rough two weeks. $FCX broke out from a 10-week long base in early May and was sold into strength on heavy volume the very next week. $FCX is just barely holding on to the 20-day EMA.

Last week, money flowed into names like $RBLX and $UPST.

$RBLX is a fairly recent IPO that broke out on volume last Friday. Per intraday alert, we entered above $79 looking for immediate follow through as volume was tracking well above average. Given that market conditions are not ideal, we are going with a stop just below breakeven.  If the price retraces most of Friday’s candle we are out.  

$UPST exploded higher after reclaiming the 50-day MA but isn’t in play for us. We also would not be interested in buying the obvious breakout to new highs as it would be a 100% move off the lows in a short period of time. Certainly, one to watch but nothing going on right now.

With the weekly charts of several major sector ETFs potentially signaling a reversal of trend, the S&P 500 is vulnerable to further selling. Our market timing model is still on a sell signal and many charts simply need more time to produce quality patterns.

There are no new setups for Monday’s session. Let’s see if $RBLX can follow through to the upside.

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

• none

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