The Wagner Daily – S&P 500 Faces Distribution Risk

The Wagner Daily – December 20, 2021

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MTG Market Timing Model – 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:

Last Wednesday’s follow-through day (FTD) in the Nasdaq Composite proved to be a dud as the index rolled over the very next day and closed below the 50-day MA. Friday’s action also broke the low of the follow-through day, which is another negative sign.  A break of the December low would confirm a reversal of trend with two consecutive lower highs and lower lows in place.

Tough to short the Nasdaq with the price so close to the prior low, but a bounce near the 50-day MA with the 20-day EMA also as resistance could improve the reward to risk ratios on setups.

  $ARKK Innovation ETF closed with a bullish engulfing candle last Friday after finding support at $90 for the third time in two weeks.  Growth may see a bounce this week.

The S&P 500 is the leading index and is still trading above the 50-day MA but also has some issues. Last Thursday’s selloff was a higher volume distribution day. If distribution occurs on days one or two after a follow-through day, then the follow-through day has a 95% failure rate. On Friday, the S&P 500 broke the low of the follow-through day, another negative sign.

$AAPL has led the S&P 500 the past few months but has struggled at highs the past few weeks. Further weakness from here could drag the S&P 500 below the 50-day MA where there is support around $166 to $168.

Also watching $NVDA and $AMD for further weakness. $AMD is still holding the 12/15 low which was a wide-ranged accumulation day on heavy volume.

Add

Below are a few symbols showing relative strength but given that market conditions are not ideal, these names may struggle to hold ground at best- $ANET $EDR $MRVL $PSTG $SWCH $SLAB $CDNS $PI.

Non growth names – $HBP $FLR $MCO $NTR $LPX $BLDR $ARCB $DFIN

There are no new setups for Monday.

Tough to find much of an edge playing the long side of the market lately. Short setups are not ideal here unless daytrading but could get interesting after a bounce.

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

• none

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