ETFs and market commentary:
Stocks recovered from early session losses to end mixed on Monday. The Dow Jones Industrial Average closed fractionally lower, while both the S&P MidCap 400 and small-cap Russell 2000 ended the session flat. Both the Nasdaq and S&P 500 eked out 0.1% gains. The homebuilder, banking and transportation sectors showed strength on Monday, while the gold miner and oil services sectors struggled.
Market internals ended the session positive. Volume jumped by 8.1% on the Nasdaq and 19.9% on the NYSE. Advancing volume outpaced declining volume by a ratio of 1.2 to 1 on the NYSE and 1.4 to 1 on the Nasdaq. Despite the bullish market internals, price action was not strong enough to justify labeling yesterday as an accumulation day for the broad market.
Yesterday, on a spike in volume, the Direxion Daily Semiconductor 3x Bull ETF (SOXL) formed a reversal candle for the second time in four days, as it tested support below its 20-day EMA. Further, this price action occurred on an uptick in volume and SOXL closed in the upper 40% of the day’s range. A rally above the four day high of $41.47 could provide a buy entry trigger for SOXL. We will be monitoring SOXL carefully for a potential long entry.
As with many ETFs yesterday, the SPDR Select Sector Financial ETF (XLF) formed a bullish reversal candle and closed near session highs. XLF is now perfectly positioned to break to higher ground. A move above $14.87 appears to be the perfect long entry trigger for this ETF. Is it? The answer is yes, and no. XLF could very easily surge to a new closing high if it clears $14.87. However, we are always cautious of entries that are “too good to be true”. When an entry is obvious, all eyes are trained on the setup. We have found that when a setup is “too obvious”, false breakouts often occur. Consequently, if we enter an obvious breakout trade such as XLF, we do so with the full understanding that a false breakout is a distinct possibility. This prepares us psychologically to accept the pullback as part of the trade. We also use false breakout candles as the pivot for a more reliable trade entry.
IYM came within one cent of hitting its stop yesterday but eventually recovered to close near session highs. PPH also reversed strongly from early session losses to set a fresh 52-week closing high. IAU closed slightly lower, as it continues to consolidate following last week’s breakout. Yesterday’s price action resulted in the formation of bullish reversal candles on all of the major indices. We will be watching the small-cap Russell 2000 carefully on Tuesday, as a breakout by this index could spark a broad market rally.
Today’s ETF Watchlist:
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 DailySubscriber Guide for important, automatic rules on trigger and stop prices
Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.
Notes:
The lack of follow through in stocks breaking out remains a concern. Other than N, we’ve had very little follow through in recent entries. Ideally we’d like to see two to three days of explosive price action from our buy point to give a stock decent separation from the pivot. For the past few weeks, it seems that the majority of stocks have only offered maybe a day or half a day of explosive action before chopping around for a few days.
There are no additions to today’s watchlist but please note the changes in red below.
Today’sStock Watchlist:
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 model account size. Changes to open positions since the previous report are listed in red text below.
Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.
Notes:
Relative Strength Watchlist:
The Relative Strength (or RS) Watchlist makes it easy for subscribers to import data into their own scanning software, such as Tradestation, Interactive Brokers, and TC2000. The list is comprised of the strongest 100 (or so) stocks in the market over the past six to 12 months. The scan is based on the following criteria and is updated every Monday:
Click here to view this week’s Relative Strength Watchlist in excel
Click here to view this week’s Relative Strength Watchlist as a text file
market timing model: BUY Signal generated on close of Sept. 21 Market timing model is…
market timing model: BUY Signal generated on close of Sept. 21 On a buy signal.…
market timing model: BUY Signal generated on close of Sept. 21 On a buy signal.…
market timing model: BUY Signal generated on close of Sept. 21 On a buy signal.…
market timing model: BUY Signal generated on close of Sept. 21 On a buy signal.…
market timing model: BUY Signal generated on close of Sept. 21 On a buy signal.…