Bullish consolidation pattern in commodity index (RJI)


Stocks lost ground on Tuesday as volume expanded. For the second consecutive day small and mid size companies took the brunt of the selling. The small-cap Russell 2000 and the S&P MidCap 400 plummeted by 1.3% and 1.1% respectively. The Dow Jones Industrial Average finished flat on the day while the Nadsdaq shed 0.8% and the S&P 500 lost 0.3%. A late session rally prevented what could have been a very bad day for Wall Street.

Internals were bearish on Tuesday. Volume increased as stocks dropped, and declining volume had the upper hand for most of the day. Turnover improved by 7.4% on the Nasdaq and 11.1% on the NYSE. The ratio of declining to advancing volume ended the session at 1.5 to 1 on both indices. Further, market leaders were under pressure most of the day. The combination of the slippage in leadership, higher volume, higher declining volume and broad market losses suggest that Tuesday was a distribution day among institutional traders.

The ELEMENTS Rogers Intl Commodity ETN (RJI) has been consolidating in a tight range and setting a sequence of lower highs since late March. If RJI can hold support near yesterday’s low and consolidate for several days, then a move back above $10.40 would likely trigger a buy entry for this ETF. We are monitoring RJI closely as a possible long candidate.

The PowerShares WilderHill Clean Energy ETF PBW is in danger of losing support of its 200-day MA. Yesterday this ETF tested the 200 MA for the third time in the past two months. Further, PBW closed below the reversal candles it formed on April 27th and April 28th that preceded the gap up of April 29th. This is quite bearish price action. Several days of sideways movement followed by a volume fueled move below yesterday’s low of $9.97 could provide a short trigger for PBW.

Market leadership was tested yesterday as big names like AMZN, BIDU, NFLX, CRM and PCLN underperformed significantly. Nonetheless, all of these market leaders were likely due for a pullback given the recent run up in the market. It would take a sharp follow through day to the downside before we would entertain the possibility of a more significant reversal.

Trade setups have been sparse the past few days. We are inclined to be patient given the recent run up in the market.

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.

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

position summary

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  • We remain 100% in cash waiting for new setups to emerge.

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Edited by Deron Wagner,
MTG Founder and Head Trader