Divergence – (XLK) (SCO)


Stocks gave back most of Tuesday’s gains on mixed volume yesterday. Higher beta issues took the brunt of the selling as both the Nasdaq and the small-cap Russell 2000 fell just over 2.0%. The S&P MidCap 400 fell 1.6% while the S&P 500 shed 1.3%. The Dow Jones Industrial Average showed the most strength on the day as it closed lower by a modest 0.6%.

Market internals ended the session mixed. Volume rose on the Nasdaq by 2.5% but fell on the NYSE by almost 12.0%. However declining volume topped advancing volume on both exchanges. On the NYSE the spread ratio ended the day at a minus 5.2 to 1 and on the Nasdaq at a minus 3.1 to 1. Because of the higher volume the Nasdaq posted both a bearish reversal and distribution day. There was clearly a divergence between the Nasdaq and the NYSE yesterday.

The S&P Select Technology SPDR ETF (XLK) gapped down and formed a reversal candle yesterday on a significant spike in volume. The fact that this burst of selling came on the heels of an accumulation day in the market does not bode well for XLK. A move below the two day low of $25.27 could provide a shorting opportunity in this ETF.

Yesterday, on a big spike in volume, the ProShares UltraShort Dow Jones AIG Crude ETF (SCO) formed a reversal candle as it undercut the 200-day MA and rallied to close near session highs. A volume fueled move back above the two day high of $53.95 could provide a buy entry trigger for this inverse ETF.

The market provided mixed signals yesterday as the Nasdaq diverged from the DJIA and the S&P 500. Given this divergence it is quite possible that we could see a pullback in the Nasdaq but sideways/rally action elsewhere. Caution is warranted in this choppy environment.

Today’s Watchlist:

There are no new 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

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  • Per intraday alert, the EUO stop price is now 17.98 (5 cents below yesterday’s opening 5-minute low).
  • 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