market timing model:
Buy – Signal generated on the close of November 23 (click here for more details)
today’s watchlist (potential trade entries):
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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 on two separate $50,000 model portfolios (one for ETFs and one for stocks). 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.
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closed positions:
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ETF position notes:
- No changes to existing positions, and no new trades were entered yesterday.
stock position notes:
- $FAF hit its break-even stop price into the close yesterday. If you did not receive a Courtesy Trade Confirmation indicating the stop was hit, it was an error on our part (so there’s nothing wrong with your e-mail). Since $FAF closed the day exactly at our stop price, anyone still holding the position and wishing to follow yesterday’s exit may simply sell at market on today’s open.
- Since this is an end-of-day newsletter, we also wish to remind subscribers that the trigger, stop, and target prices listed for setups and open positions in each night’s report area ALWAYS automatically honored on our part if they are hit the next day. The Courtesy Trade Confirmation e-mails and/or text alerts are exactly that…just a courtesy to let you know action was taken on something that was already clearly listed in the previous night’s newsletter.
ETF and broad market commentary:
After starting flat to slightly lower on the open, the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average grinded their way higher throughout the session before finishing with an average gain of 0.4%. Small and mid-cap stocks showed a touch of relative weakness, as both the Russell 2000 and S&P Midcap 400 Indices ticked just 0.2% higher. Despite the modest gains across the board, it was technically an uneventful day because each of the major indices formed an inside day, and total volume levels in both exchanges eased substantially as well.
In yesterday’s newsletter, we listed a handful of European ETFs that have been showing relative strength by breaking out in recent weeks. However, the strength has not been limited to Europe. Emerging Markets ETFs have also been outperforming by breaking out above resistance levels, even as the US broad market chops around in an indecisive range. The strength in Emerging Markets ETFs can be seen on the daily chart pattern of Direxion Emerging Markets Bull 3X ETF ($EDC), a leveraged ETF comprised of a basket of stocks from emerging regions:
On the chart above, notice that $EDC just broke out above horizontal price resistance to close at its highest level since May of this year (albeit on lighter volume). By comparison, the S&P, Nasdaq, and Dow are still approximately 3 to 5% below their prior highs from September. When a stock or ETF is exhibiting such relative strength that it manages to breakout to new highs, even while the benchmark indexes are still trading firmly below their prior highs, what you think happens when the major indices eventually bounce higher? The stocks and ETFs with relative strength are typically the first to rocket much higher. Conversely, even if the broad market starts heading back down, equities with relative strength will generally pull back less than the main stock market indexes, and will be among the last to succumb to broad-based selling pressure. This is the basic concept of relative strength trading, which forms an important part of our ETF swing trading strategy (you may wish to check out my ETF trading books for further details on this system).
Since yesterday’s breakout level (prior resistance) in $EDC should now serve as the new area of support, aggressive active traders may consider buying EDC if it pulls back to near support of the breakout level. However, we are not adding $EDC to our “official” ETF Watchlist at this time. Although the $EDC breakout is decent, we have been seeing an increasing number of false breakouts in the market. As such, we first need to start seeing some follow-through in our existing positions, and leading stocks in general, before assuming more exposure in our model ETF trading portfolio.
With all four of our open ETF positions closing relatively near the flatline yesterday, there’s not much to report in the way of a position update. Both of our long positions ($EPOL and $FXI) edged higher yesterday, continuing to build on recent momentum of their breakouts to new 52-week highs. Of our two bearish ETF positions, $IBB short and $RWM long (a “short ETF”), the former moved slightly in our favor and the latter moved slightly against us. None of the four positions warrant a change in protective stop price at this time, as we have already limited risk by reducing our initial share size by about 50% at the time of entry.
We concluded yesterday’s commentary by saying, “Since volume in the stock market usually dries up substantially starting the week before Christmas holiday, there is really only just over one week of active trading left this year.” However, given the apathetic price action of the past several days (leading stocks and ETFs have not been making significant headway, nor have weak equities been falling apart), it is starting to feel like the lazy holiday trading season is upon us a bit early this year. Unfortunately, there’s nothing we can do about it other than monitoring existing positions for any required changes to stop or target prices. Successful traders know they can only take what the market gives them; those who try to force trades in less than ideal conditions and when the broad market is showing mixed signals will eventually give back their hard-earned profits from the easier trading environments. A focus on capital preservation, rather than large profits, is not a bad right now.
stock commentary:
As mentioned in the ETF commentary above, we are dealing with an apathetic stock market in which neither the bulls nor bears seem to have an intense desire to dominate. The individual stocks we have recently traded were valid technical setups at time of entry, but have merely been spinning their wheels (with the exception of our recent 11% gain in $QIHU).
Three individual stocks on our radar screen with decent chart patterns setting up for potential buy entry are: $RMD, $RAX, and $CRM. If the broad market was showing more enthusiasm, and stocks are following through on the long side, we would add one or more of these stocks to our “official” watchlist today. However, like we said, we’re waiting to see some follow-through in the market before taking on more long exposure.
If you are a new subscriber, please e-mail [email protected] with any questions regarding our trading strategy, money management, or how to make the most out of this report.
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.