today’s watchlist (potential trade entries):

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 a pink shaded cell below. New entries are shaded in green cells. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.

Having trouble seeing the open positions graphic above? Click here to view it directly on your web browser instead.

closed positions:

Having trouble seeing the closed positions graphic above? Click here to view it directly on your web browser instead.

ETF position notes:

• The FAZ setup was automatically cancelled on Friday, as it opened more than 1.3% above the trigger.
• For those with qualified accounts who are unable to go short you could consider buying RETS although it is thinly traded. Position details for RETS: trigger – 12.77, stop – 12.06, shares – 400, target – 14.25.

stock position notes:

• No trades were made.

ETF and broad market commentary:

Stocks closed mixed on Wednesday but lower for the week. All the major indices closed well off session highs but trade was light. Both the Nasdaq and the S&P MIdCap 400 were the day’s winners as they tacked on 0.1%. The small-cap Russell 2000 slid a modest 0.2%, while both the Dow Jones Industrial Average and the S&P 500 lost 0.3%.

Market internals also ended the day mixed. Volume slid on the Nasdaq by 13.1% and on the NYSE by 1.5%. Declining volume edged out advancing volume on the Nasdaq by 1.1 to 1. On the NYSE, declining volume held a 2 to 1 advantage to advancing volume. There’s very little information that can be gleaned from Friday’s internals.

Since March of this year, the iShares Russell 2000 Index Trust (IWM) has tested support near $78.00, and in the process formed a head and shoulders like pattern. A move below Friday’s low of $78.42 could result in a break of the neckline of the head and shoulders pattern. A drop below this key market would likely result in a quick move to the 200-day MA for IWM.

Since losing support of its 20-day EMA and 50-day MA on May 7th, the SPDR S&P Retail ETF (XRT) has found resistance at these key levels. On Friday, XRT formed a bearish reversal candle as it failed to reclaim its 20-day EMA for the second time in as many days. A move below the two day low of $$59.72 could present a shorting opportunity in this ETF. We are placing XRT on the watchlist. Details for this setup are available to our clients in the watchlist section of the newsletter.

The market continues to exhibit indecision as it has “ping ponged” in a tight four day trading range. However, the longer we continue to consolidate at the lows, the higher the probability that the next significant move in the market will be lower. We’re keeping a close eye on the small-cap Russell 2000. A loss of support in this index could pull the entire market lower.

stock commentary:

If SP&P 500 and Nadsaq can push through the four day high and hold, then we will probably see a short-term bounce into overhead resistance around the 20 & 50-day MAs this week. While the market volume pattern is currently bearish, this can easily be corrected with a few accumulation days on the NYSE or Nasdaq. Here is a list of stocks we are currently monitoring for buy entries if/when market conditions stabilize (this is not the full watchlist):

RYL DHI MHO PHM CRAY CHSI SXCI AFFY MDVN PCYC MDCO SWI CLUB HOTT SPNC LNKD DNKN FUL MGAM ALGT TITN ELGX CKEC JAZZ ATHN KTCC Z

If the market is able to put in a few accumulation days and stabilize, then we may establish one or two small sized long positons to test the water. Just how how much long exposure we grab will depend on the setups. If there are no quality setups we may be forced to sit in cash until reliable buy points emerge. There is no need to rush, as we always want to let the market prove itself before we take on significant exposure.

If you are a new subscriber, please e-mail rick@morpheustrading.com with any questions regarding our trading strategy, money management, or how to make the most out of this report.