market timing model:
today’s watchlist (potential trade entries):
Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on two separate $50,000 model portfolios (one for ETFs and one for stocks). Changes to open positions since the previous report are listed in red shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.
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ETF position notes:
- DUST long triggered.
stock position notes:
- CROX short triggered.
ETF and broad market commentary:
Stocks finished modestly higher for a second consecutive day, on mixed trade. The small-cap Russell 2000 led the advance, as it posted a 1.5% gain. The S&P MidCap 400 and the S&P 500 added 0.9%, while both the Nasdaq and the Dow Jones Industrial Average tacked on 0.7%.
For the second time in as many sessions, market internals were mixed. On the Nasdaq, volume improved by 2.1%, while on the NYSE volume slid just over 4.2%. Advancing volume topped declining volume across the board on Wednesday. By the close, the spread ratio stood at a plus 3.9 to 1 on the NYSE and a plus 2.9 to 1 on the Nasdaq. In almost stealth like manner, the Nasdaq posted another accumulation day yesterday.
Over the past three sessions, the ProShares UltraShort Basic Materials ETF (SMN) has pulled back to, and held support of its 200-day moving average. This inverse ETF could provide a buying opportunity if it forms a reversal candle (see blue candlestick) on an undercut of the 200-day and/or 20-day moving averages. A move above the high of the reversal candle would then provide a perfect buy entry trigger. We will be monitoring SMN closely for a potential buy entry.
Yesterday, DUST hit its trigger and we entered the trade. Despite the rally in the market, UUP remained strong and closed slightly higher on the day. Both MZZ and FXP pulled back for a second consecutive day, but are now at support of their respective 20-day EMAs. Given the lack of conviction in the market, we are not inclined to open any new positions without first booking profits from our open trades. It makes little sense to take on additional exposure until the positions we are in prove profitable. The price action on the Nasdaq has been subtle over the past two days, but given that it has come in the form of back to back accumulation days, it’s difficult to ignore the possibility that a buy signal could be in sight. The price action on the Nasdaq has been subtle over the past two days. Although the buying action has not been particularly powerful, it has come in the form of back to back accumulation days. It’s difficult to ignore the possibility that a buy signal could be near, when this type of price action occurs.
EBAY has pulled back in bullish fashion stopping just shy of the 20-day EMA before reversing the past few days. The buy entry is over the two-bar high with a fairly tight stop of 4%. We are looking for a 13% move up as a target but we will be happy with a 8-10% move.
Our scans have turned up a few quality buy patterns so far this week; however, with our market timing model at a sell signal we are hesitant to add too much long exposure until we see a quality follow through day. Establishing one or two long positions while the timing model is on a sell signal is acceptable, especially when the market is showing some signs of life.
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relative strength watchlist:
Our 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. This list is comprised of the strongest 100 (or so) stocks in the market over the past six to 12 months. The scan is updated every Sunday, and this week’s RS Watchlist can be downloaded by logging in to the Members Area of our web site.