Commentary:

For the second consecutive day stocks finished near session highs but once again on lighter volume. Despite the positive price action there was disparity among the major indices. The small-cap Russell 2000 and the Nasdaq led the advance as they posted gains of 1.7% and 1.5% respectively. Both the S&P 500 and the S&P MidCap 400 tacked on 0.9% but the Dow Jones Industrial Average severely lagged the other indices as it could only muster a slim 0.4% improvement for the session. It is noteworthy that the Dow Jones Transportation Average surged an impressive 3.4% despite the Dow’s weak performance.

For the second time in as many days Internals were mixed. Turnover fell by a modest 2.5% on the Nasdaq and 2.5% on the Big Board. However advancing volume topped declining volume across the board. By the closing bell the ratio of advancing to declining volume rested at 3.2 to 1 on the NYSE and 5.4 to 1 on the Nasdaq. The last two days of higher price action has given all the signs of a bear market rally. Light volume rallies are always suspect when the broad market is down-trending. Nonetheless, we would still classify Tuesday as a follow through day and would not be surprised if the market were to rally for several more days.

Since gapping down on August 4th, the iShares MSCI Japan Index ETF has been one of the weakest ETFs in the world market. EWJ is now just below resistance of its 20-day EMA. A move into this key moving average could present a short entry trigger for this ETF. We are monitoring EWJ for a possible short entry.

Since May of this year the United States Oil Fund LP ETF (USO) has been down-trending along its 20 and 50-day moving averages. USO is no approaching resistance of its downtrend line, a former support level and the 50-day MA. An overcut of these key resistance levels could provide a quality shorting opportunity in this ETF. We are monitoring USO closely as a possible short candidate.

The market continues to struggle in its latest move higher. Although we can justifiably classify yesterday as a follow through day, the lack of turnover puts into question the sustainability of the current advance. For the moment, we are content to sit in cash and wait for the next wave of quality setups to develop.

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Today’s Watchlist:

There are no new official setups for today. We will send an Intraday Alert if any new trades are made.

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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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Notes:

• No trades were made.
• 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 support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.

Edited by Deron Wagner,
MTG Founder and
Head Trader