Commentary:

In a whipsaw trading session stocks closed mixed on higher volume. The US equity markets began the day with a massive gap down only to recover steadily throughout the day to close at or near session highs. The technology rich Nasdaq led the comeback as it posted a 0.7 gain for the session. Both the small-cap Russell 2000 and S&P MidCap 400 ended the day flat while the Dow Jones Industrial Average and S&P 500 shed 0.5% and 0.3% respectively.

Internals were mixed on the session. Volume spiked across the board. Both the Nasdaq and the NYSE saw turnover rise by approximately 29.0%. The spread ratio painted a slightly different picture as declining volume topped advancing volume on the Big Board by a ratio of 1.9 to 1 while on the Nasdaq advancing volume held the upper hand by a ratio of 1.7 to 1. As a result, the DJIA and S&P 500 saw distribution days while the Nasdaq experienced an accumulation day. The big spike in volume left little doubt that institutions were a major force in yesterday’s move.

Via intraday alert we entered a short position in COW yesterday. Trade details are available to our members in the open position segment of the newsletter.

The iShares Malaysia (Free) Index ETF (EWM) provides one of the best examples of relative strength that we’ve seen in quite some time. During the most recent broad market selloff and the whipsaw action of the past three sessions, EWM has not once set a new swing low. Rather, it has only tested support and consolidated. EWM provides several potential long entries. The first would be a move and consolidation above yesterday’s closing high. The second setup would involve an inside trading day and possibly several days of sideways action followed by a move above this consolidation. The final potential long entry could be a move above the 20-day EMA that hold intraday. We are monitoring EWM closely for a possible entry.

The iShares Russell 3000 Index ETF (IWV) may have put in an interim bottom. Yesterday, this ETF tested support of the previous reversal candle, the 200-day MA and it’s 2 year trendline. Further, IWV formed a second reversal candle as it tested this support level. Several days of consolidation could be just what IWV requires to begin a move back to its prior highs.

It is noteworthy that all five major indices formed distinct bullish reversal candles and we view this as significant enough to possibly neutralize any bearish effects of the distribution day on the DJIA and S&P 500. To confirm this opinion we would want to see a follow through day above yesterday’s high on both of these indices.

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Today’s Watchlist:

There are no new official setups for today. As always, we will send an Intraday Alert if any new trades are made.

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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

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Notes:

• COW short setup triggered after the first five minutes of trading.
• 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 support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.

Edited by Deron Wagner,
MTG Founder and
Head Trader