Commentary:

Stocks fell sharply on Monday but trade was mixed. Prices dropped across the board as all five major indices closed lower. However, stocks did recover from session lows. The small-cap Russell 2000 dropped 2.4% while the Dow Jones Industrial Average and the S&P MidCap 400 fell 2.1% and 2.0% respectively. Both the Nasdaq and the S&P 500 dropped 1.9%.

For the second time in as many days, market internals ended the session mixed. Turnover fell on the NYSE by 6.6% but climbed on the Nasdaq by 17.7%. However, declining volume held the upper hand on both exchanges. By the closing bell the ratio of declining volume to advancing volume stood at 14 to 1 on the NYSE and 3.8 to 1 on the Nasdaq. Based on the higher volume and higher declining volume we would classify yesterday as a distribution day on the Nasdaq.

Yesterday, on increasing volume, the S&P 500 ($SPX.X) lost support of and closed below its 50-day MA. The question now becomes whether or not this broad market index can reclaim this key mark and resist further decline. If the S&P cannot find support at the current level, it is quite possible that we could retest the most recent swing low near 1,100.

Despite the recent sell off in the market, the SPDR S&P Retail ETF (XRT) has been demonstrating relative strength. While the S&P 500 has lost support of its 50-day MA, XRT undercut, but held support at this key mark. If XRT continues to exhibit this kind of strength, when the market recovers, this should be one of the first ETFs to move to higher ground.

Distribution continued to mar the market landscape yesterday as the Nasdaq, but not the NYSE fell under selling pressure. Our assessment remains bearish but we must now wait for setups to form in order to take short positions. In the meantime we strongly suggest patience in this challenging trading environment. Remember, cash is a position.

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Today’s Watchlist:

There are no official setups for today. As always, 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