Cautiously Pessimistic? – (EUO) (REM)


Stocks closed lower on Monday on light trade. Despite posting early gains, all five major indices ended in the red, with higher beta issues leading the decline. The small-cap Russell 2000 dropped 1.9% while the S&P MidCap 400 lost 1.7%. The Dow Jones Industrial Average, S&P 500 and Nasdaq all lost support of their respective three day lows, as they closed near session lows. By the closing bell these three indices posted losses of 0.8%, 1.2% and 1.3% respectively.

Market internals were mixed on Monday. As might be expected following a quadruple witching options expiration day, market volume was considerably lighter. Turnover dropped by a whopping 38.0% on the Nasdaq and 39.0% on the NYSE. Declining volume was higher than advancing volume on both exchanges. By the closing bell the ratio of down to up volume stood at 10.3 to 1 on the NYSE and 3.8 to 1 on the Nasdaq.

Since its big breakout move on December 12th, the ProShares UltraShort Euro ETF (EUO) has been consolidating for the past four days at the highs of the move. EUO has also formed a pennant like formation as it has held support at the 20-period EMA on the 60-minute chart. A move back above the three day high of $20.21 could provide a buy entry trigger in this ETF. Above this key mark a partial trade position could be entered and the remainder of the position above the four day high of $21.32. Alternatively, EUO offers a possible entry on a pullback into its 20-day EMA.

Yesterday, on a massive spike in volume, the iShares FTSE NAREIT Mortgage REITs ETF (REM) formed a reversal candle as it failed to break above resistance of its nine day high. Also, notice the bearish divergence between the price action in REM and the Accumulation-Distribution Histogram. A move below the eight day low of $12.83 could offer a short entry trigger for this ETF.

The market continues to struggle to find a bid. However, as we stated in Friday’s newsletter, we have still not witnessed wholesale carnage during this selloff. Some sectors are still holding up. On the other hand, many more stocks that have been basing near their 52-week highs have begun to roll over. For the moment, it appears that we are headed lower but we still remain cautious.

Today’s Watchlist:

There are no new official setups for today. As always, we will send an intraday alert if any 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

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  • Per intraday alert, AGA stopped us out beneath the 5-minute low. Both watchlist candidates EDZ and SMN triggered.
  • 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.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader