The Wagner Daily


Stocks concluded a very solid month of September with a day of uneventful price action yesterday, as the major indices registered moderate losses. On the open, the S&P 500 Index gapped above the highs of its recent range (beyond the 1150 level), but traders immediately sold into strength, causing the intraday breakout attempt to quickly fail. Thereafter, the broad market trended lower throughout the morning, then recovered slightly in the afternoon. Both the S&P 500 Index and Nasdaq Composite declined 0.3%. The Dow Jones was lower by 0.4%. Small and mid-cap stocks again showed relative strength. The Russell 2000 slipped just 0.2%, while the S&P MidCap 400 eked out a gain of 0.1%. All the main stock market indexes closed near the bottom quarter of their intraday trading ranges.

The failed intraday breakout attempt was negative, but worse was the substantially higher volume that accompanied yesterday’s decline. Total volume in the NYSE jumped 27% and turnover in the Nasdaq was 12% higher than the previous day’s level. The higher volume losses caused both the S&P and Nasdaq to register a bearish “distribution day,” the second such occurrence of institutional selling in recent weeks. An occasional decline on increased trade is normal, and can usually be absorbed by a healthy market. But if the “distribution day” count exceeds three days within a short period of time, a substantial market correction usually follows.

Despite yesterday’s moderate decline in the broad market, 4 of the 5 open positions in our model ETF portfolio moved higher yesterday. This is primarily because most of the positions in our portfolio have a low overall correlation to the direction of the broad market. Each of the four positions that rose yesterday is also showing an unrealized gain since its entry point. To recap, those positions are: iShares JP Morgan Emerging Markets Bond Fund (EMB), iPath S&P 500 VIX Mid-Term Futures (VXZ), JP Morgan Alerian MLP Index ETN (AMJ), and iShares Nasdaq Biotechnology Index Fund (IBB). The sole position presently showing a slight loss, and the only one that did not move higher yesterday, is ProShares UltraShort Yen (YCS). For subscribers who are in these positions, let’s take an updated technical look at the charts of all five. On each of the annotated charts below, the pink rectangle marks the day of trade entry:






In recent days, we’ve been discussing the importance of the S&P 500 Index breaking out above the pivotal 1150 resistance level. Yesterday, the index probed above that level on an intraday basis, but failed to close above it. As such, the S&P 500 remains in a sideways consolidation pattern. The 1150 level is still important, but now there is additional overhead supply created from yesterday’s failed breakout attempt. Overall, the trend continues to favor the bulls, but yesterday’s bearish intraday price action and higher volume losses could be a warning sign that the buyers are running out of gas (at least in the near-term). Although the market has not yet given sufficient reason to consider new entries on the short side, prudent traders may consider tightening stops on existing long positions with significant correlation to broad market direction. This will enable one to lock in gains in the event of a pullback.

Today’s Watchlist:

There are no new setups in the pre-market today. However, PBW remains on our 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 Daily Subscriber Guide for important, automatic rules on trigger and stop prices.

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  • No changes to our open positions at this time.
  • 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.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader