Gold still looking like a short ($GLD)

market timing model:

– Signal generated on the close of April 24 (click here for more details)

today’s watchlist (potential trade entries):

$todays watchlist
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open positions:

Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based a $100,000 model portfolio. Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.

$todays watchlist
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closed positions:

open position summary
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ETF position notes:

  • No setups triggered.

stock position notes:

  • $URI add triggered.

ETF, stock, and broad market commentary:

Stocks concluded the week in uneventful fashion last Friday, as the major indices drifted in a relatively tight, sideways range before finishing the day with mixed results. The Dow Jones Industrial Average edged 0.1% higher, the S&P 500 slipped 0.2%, and the NASDAQ Composite declined 0.3%. Total volume in both exchanges was lighter than the previous day’s levels, which was positive considering the broad market was flat to lower. Overall, it was a positive week that sent the main stock market indexes back to within striking distance of their prior highs from mid-April.

In last Friday’s newsletter, we highlighted SPDR Gold Trust ($GLD) as a potential short entry as it bounced substantially off its recent lows and into near-term resistance. Specifically, recall we were looking for a short entry if $GLD fell below the prior day’s low.

Although $GLD did not trade below the prior day’s low on Friday, it came within 25 cents (0.2%) of doing so. Going into today, the trade setup still looks quite good. In fact, a short entry into $GLD is now a slightly lower risk entry point because the ETF “overcut” resistance of its 20-day exponential moving average on an intraday basis, then closed well below it AND in the lower third of its intraday trading range. This is shown on the updated daily chart of $GLD below:

$GLD overcuts its 20-day EMA on the bounce

With this swing trade setup, we want to clarify that we are NOT necessarily expecting $GLD to make another leg lower within its current downtrend. Rather, we are merely anticipating at least a retest of the April 15 low (such as an “undercut”) before $GLD stabilizes and tries to make any type of significant move higher. As such, note that our projected holding period of this momentum trade setup is expected to be shorter-term than our typical ETF swing trade.

To reiterate, please also note that our actual trade setup on the watchlist is to buy the inversely correlated DB Gold Double Short ETN ($DZZ), rather than selling short $GLD. This is simply because many of our subscribers have non-marginable cash accounts, such as an IRA accounts, that prohibit short selling of any kind. Nevertheless, we are basing our entry and exit points on the actual chart of $GLD, rather than $DZZ, to ensure the most accurate tracking to the price of spot gold.

Another ETF we have recent been stalking for buy entry (and returns to our watchlist today) is Guggenheim China Real Estate ETF ($TAO). This bullish, intermediate-term trend reversal setup is shown on the daily chart of $TAO below:

$TAO trend reversal setup

Initially, we were looking to buy $TAO on a pullback to its April 19 low, which hasn’t happened yet. However, the 20-day exponential moving average just crossed up above its 50-day moving average two days ago, which is a confirming signal of a bullish intermediate-term trend reversal. Because of its long-term uptrend (on the weekly chart), the 200-day moving average continues sloping steadily higher as well. As such, the trade setup remains solid.

Going into today, our new buy entry point is a pullback to very near-term support of its rising 10-day moving average. If it triggers for buy entry on the pullback, it will only be 25% of our maximum risk per trade because it is a “starter position” that we will add to if price action subsequently acts well. The stop price is below support of the breakout ($22.07 area) and below the swing low of April 15 ($21.45). Please note our exact buy limit price for this ETF swing trade on today’s watchlist.

Last Thursday’s surge in $AMBA was confirmed by a big spike in volume. This was the fourth significant spike in volume above $12 since the gap up in March. The big volume demand for $AMBA at the highs is a bullish sign. We are adding 100 shares to our existing position at 13.80. We will not be using the 5-minute rule for the $AMBA buy entry. Because the setup has already triggered and held above 13.40, there is no need to wait for confirmation.

$AMBA Breakout

Our timing model remains in neutral mode; however, it is only one follow through day away from triggering a buy signal (a follow through day is when the S&P 500 or Nasdaq closes up 1.3% or more on higher volume). The reason why we are long ahead of the buy signal is because the market has yet to show signs of bad distribution and we continue to see a number of solid setups emerge. Yes, we have seen quite a bit of distribution in the averages the past few weeks. However, that selling action is not all bad if institutions are ditching extended groups and rotating in to new ones. Let’s say we have 5 distribution days on board and our scans produce little if any bullish setups. This would probably force us to to sit mostly in cash, as a sell signal in the broad market averages would also be confirmed by a sell signal in leading stocks. In another scenario (much like the current rally) say we have 8 distribution days on board, but our scans produce plenty of bullish setups. Although there are 3 more distribution days on board, we would be forced to go long if quality stocks are breaking out from bullish patterns. This is why it pays to scan stocks and follow leadership.

relative strength combo watchlist:

Our Relative Strength Combo Watchlist makes it easy for subscribers to import data into their own scanning software, such as Tradestation, Interactive Brokers, and TC2000. This list is comprised of the strongest stocks (technically and fundamentally) in the market over the past six to 12 months. The scan is updated every Sunday, and this week’s RS Combo Watchlist can be downloaded by logging in to the Members Area of our web site.

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