market timing model:

sell

today’s watchlist (potential trade entries):

open positions:

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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closed positions:

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ETF position notes:

• FAZ stop triggered and we closed the position.

stock position notes:

• No trades were made.

ETF and broad market commentary:

Following an early morning gap up, stocks plummeted to close near session lows, on higher volume. All five major indices fell at least 1.0%, with higher beta issues leading the decline. The small-cap Russell 2000 and the S&P MidCap 400 plunged 2.4% and 2.0% respectively. The tech-rich Nasdaq slid 1.7%, while the S&P 500 and the Dow Jones Industrial Average fell 1.3% and 1.1% respectively.

Market internals were clearly bearish on Monday. Volume climbed on the Nasdaq by 6.2% and on the NYSE by 8.2%. Further, there was a surge of selling activity into the close. Declining volume overwhelmed advancing volume on the NYSE by a ratio of 10.4 to 1 and on the Nasdaq by a factor of 4.7 to 1. The combination of yesterday’s negative price action and high volume resulted in a distribution day on both exchanges.

Yesterday, the Direxion Daily Technology Bear 3x Shares ETF (TYP) formed a bullish engulfing candle on burst in volume. An engulfing candle is formed when the present day’s price action completely “engulfs” the previous day’s candlestick. A move above yesterday’s high of $11.68 could present a buying opportunity in this inverse ETF. We are placing TYP on the watchlist. Trade details are posted in the watchlist section of the newsletter.

We were stopped out of our long position in FAZ on the morning gap. However, FAZ now presents a new buying opportunity and we are placing it on the watchlist. Although we were stopped out of FAZ we a willing to re-enter the trade because conditions warrant a re-entry. Each trade stands of its own merits. If a quality setup exists, then we will take on the trade. However, entering a trade without a setup is nothing more than revenge trading. Trade details are provided for our subscribers in the watchlist segment of the newsletter.

Yesterday was a rough day for the market. Price action was bearish from the opening bell, all the way into the close. All of the major indices put in significant reversal candles, as did many stocks and ETFs. We now have a sizeable number of setups that favor the short side of the market.

stock commentary:

TKR put in another bearish reversal candle yesterday, closing at the lows of the session on a pick up in volume. The trade now looks to be in good shape. FFIV closed back below the 10-day MA and a break of the two day low should send the stock much lower over the next few days. Note that we lowered the stop in FFIV and TKR in the open positions section above.

Top long candidates we are monitoring: ARNA MLNX AOL DDD LF AFFY LQDT SXCI WWWW EQIX

If you are a new subscriber, please e-mail rick@morpheustrading.com with any questions regarding our trading strategy, money management, or how to make the most out of this report.
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.