A Debt Deal Is Struck?: (SPY) (QQQ)


Friday brought a whipsaw day of trading to Wall Street as stocks closed modestly lower across the board. All five major indices ended the session down. The Dow Jones Industrial led the descent as it slid 0.8% on the session. The S&P 500 ended the day down by 0.7% while the Nasdaq and the S&P MidCap 400 lost 0.4% and 0.3% respectively. The small-cap Russell 2000 closed marginally lower.

Market internals were bearish on Friday but the day’s price action does not appear to support broad based distribution in the market. Turnover was higher on both exchanges. Volume increased on the Nasdaq by 9.9% and on the NYSE by 15.4%. For the third consecutive day declining volume outpaced advancing volume across the board. The session ended with the spread ratio at 2.4 to 1 on the NYSE and 1.7 to 1 on the Nasdaq in favor of declining volume. We find it difficult to categorize Friday as a wholesale distribution day given reversal bars formed on the S&P 500, S&P MidCap 400, Russell 2000, Dow Jones Transportation Average and the NYSE.

Given that we are likely to see a sharp gap up on Monday morning, a review of both the S&P 500 and the Nasdaq are in order. Notice that the E-mini S&P 500 Futures (@ES) held support of its 200-day MA on Friday and in the overnight markets has reclaimed its 50-day MA. However, the 20-day and 50-day moving averages do present formidable resistance since we just lost support of these key marks. The picture on the Nasdaq looks somewhat better as the Nasdaq Composite Index ($COMPX) and the E-mini Nasdaq 100 Futures (@NQ) never came close to testing their respective 200-day MAs. In fact the Nasdaq 100 only undercut its 20-day moving average on Friday and in the overnight market has already reclaimed this key mark. Still, this whipsaw price action is not generally a good sign for bulls and in order to move higher the market likely needs at least several weeks of sideways price action to repair some of the recent damage.

As of this writing both the S&P 500 and Nasdaq futures are up over 1.25%. This price action is not surprising given that a deal appears to have been reached on the debt crisis. But given the divide that seems to exist in Washington we are on guard for more whipsaw action. The news is less important to us than how the market internalizes the news. Our cues come from price and volume action in the market and not media sources. We have stated several times over the past two weeks that we preferred to take a wait and see approach to trading in the current market environment and this sharp price reversal in futures markets supports our rationale. We still hold little desire to jump back in the market on either the short or long side until a clearer picture develops as to the market’s next big move.

Today’s Watchlist:

There are no new setups for today. As always, we will send an intraday alert if any new trades are made.

Daily Performance Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices

    position summary

    Having trouble seeing the position summary graphic above?
    Click here to view it directly on your Internet browser instead.


  • No changes to our open position.
  • Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
  • For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.

    Have you had your free 1-month trial to Morpheus Trading Group’s additional ETF and stock trading newsletters?

      Edited by Deron Wagner,
      MTG Founder and
      Head Trader