market timing model: 

Buy – Signal generated on the close of July 27 (click here for more details)

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 red 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:

• Removed YANG from the watchlist.

stock position notes:

• Two new buy setups in AOS and EW.

ETF and broad market commentary:

Friday was a strong day for Wall Street. Stocks moved significantly higher for the second straight day on Friday, but trade was mixed. Higher beta issues led the market higher, as the small-cap Russell 2000, Nasdaq and S&P MidCap 400 posted gains of 2.4%, 2.2% and 2.1% respectively. The S&P 500 advanced by a healthy 1.9%, while the Dow Jones Industrial Average improved by 1.5%.

Market internals ended the session mixed. Volume increased by 7.9% on the Nasdaq but faded by 1.5% on the NYSE. Although total volume was lighter on the NYSE, advancing volume overwhelmed declining volume by a ratio of 16.3 to 1. On the Nasdaq, advancing volume topped declining volume by a more modest 2.4 to 1. Friday’s higher volume on the Nasdaq points to institutional buying. As a result, the Nasdaq has now posted back to back accumulation days. Friday’s light volume on the NYSE eliminates any possibility of an accumulation day for this index.

Yesterday, on a burst of volume, the ProShares UltraShort Euro ETF (EUO) formed a bullish reversal candle and closed near session highs. EUO offers two possible long entries. The first possible long entry could occur if EUO rallied above the two day high of $22.16. Alternative, EUO could offer a potential buying opportunity if it were to sell off further and reverse at its 50-day MA. We will continue to monitor EUO for a possible buy entry.

Based on Friday’s price action, we are removing YANG from the watchlist. The market has now put in back to back accumulation days which is quite bullish. Both the Dow Jones Industrial Average and the S&P 500 surged above their July 19th swing highs and closed near session highs. However, the small-cap Russell 2000, S&P MidCap 400 and Nasdaq are approaching, but still have not challenged their most recent swing highs. All three of these indices are now coming into resistance of recently established downtrend lines. The market appears to be repairing itself nice and appears ready to break out of the recent trading range. We are now just waiting for the Nasdaq to confirm the breakout.

stock commentary:

Based on the back to back accumulation days on the Nasdaq Composite, the market timing model has shifted into buy mode. We trade stocks, not the broad market averages, so a buy signal by itself without valid basing patterns and proper buy points is useless. If the market is going to stage a meaningful advance, then we will eventually have to a strong pick up in the number of bullish patterns. There is no need to rush in to the market and load up the portfolio, as there will be plenty of time to make money when there is more confirmation.

Our weekend scans turned up a few potential buy setups, but many stocks need a few more weeks of base building before they are ready. We have two new setups listed in the watch list section. Our plan over the next two weeks is to be patient and wait for the patterns to develop while the market avoids multiple, heavy volume distribution days.

Note: We have replaced the Relative Strength watchlist with the Relative Strength Combo watchlist. This new list combines strong price action with top fundamentals to produce ideal candidates on the long side. Stocks that make this are NOT an automatic buy. Each pattern must be examined for a low risk entry point before any action is taken. The number of stocks on this watchlist will vary depending on market conditions. This list is not a recommendation to buy.

 

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.

 
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.