ETFs and market commentary:
Stocks reversed sharply on Wednesday to close lower, but on mixed trade. The major indices all closed in the red, as both the DJIA and the small-cap Russell 2000 shed 0.8%. Both the Nasdaq and the S&P 500 fell 0.5%, while the S&P MidCap 400 lost 0.3% on the session. Among the few sectors showing relative strength on Wednesday were gold mining, coal, wireless communications and insurance. Weaker sectors included transportation, oil services, real estate, retail and defense.
Despite the sharp intraday reversal, market internals finished mixed on Wednesday. Volume surged on the NYSE by 8.8% but fell on the Nasdaq by just over 4.0%. Declining volume topped advancing volume on the NYSE by a ratio of 1.9 to 1 and on the Nasdaq by a ratio of 1.3 to 1. The NYSE posted its first distribution day in a month. The Nasdaq escaped distribution because its selloff came on lighter volume.
Yesterday, the S&P Select Sector Technology SPDR ETF (XLK) formed a bearish reversal candle on an increase in volume. Given this price and volume action it appears that XLK may take a rest from the recent rally. A pullback by this ETF into support of its uptrend line and 20-day EMA could provide a potential buying opportunity.
Over the past two weeks, the ProShares UltraShort Basic Materials ETF (SMN) has based out and broken above a multi-month downtrend line. Yesterday, for the second day in a row, SMN attempted to move above resistance of its 20-day EMA. A volume fueled move back above this key mark could provide a buying opportunity in this inverse ETF. Although we are not inclined to do much shorting in a bull market, basic materials have recently shown relative weakness to the broad market. Accordingly, an inverse ETF such as SMN could provide a quick opportunity to take on short exposure.
Yesterday, SOXL triggered and we opened a long position. Although it did not hit its stop, we made a judgment call to exit IYT for a small gain. The selloff in IYT was violent and was accompanied by big volume. This type of price and volume action suggests that additional selling is likely. DVY held support yesterday and we are still in this position. The selling in DVY was on light volume and therefore didn’t give us as much concern as IYT.
Even though bears wrestled control of the market yesterday, we avoided a distribution day on the Nasdaq. Unless we begin to see numerous distribution days over a short timeframe, we view any selling as an opportunity to purchase the strongest ETFs near support levels.
Today’s ETF Watchlist:
Note: The old watchlist is being replaced by the excel graphic below:
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 DailySubscriber Guide for important, automatic rules on trigger and stop prices
Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.
Notes:
- IAU is listed twice in today’s watchlist due to the separate entries. SOXL is listed twice in the open positions section due to the split stops. Note the change to the PPH trigger price. Per intraday alert, we sold IYT due to yesterday’s breakdown below the 20-day EMA.
- 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.
- For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.
Due to the sharp selling action late in the day, we made a judgement call to back away from some of our positions that were vulnerable to a selloff or have not performed as expected. If the market follows through to the downside, then we would anticipate a short-term correction taking the major averages down to the 20-day EMA. Due to the lack of distribution in the market, any pullback will probably be short lived and eventually be resolved to the upside.
NOTE: We are changing the name of the Full-Serve watchlist to the “Stock Watchlist” to reduce confusion so that both newsletters use the same terminology. Because of this, we will no longer have a Self-Serve watchlist.
Daily Stock Summary
Below is an overview of all “full-serve” open positions, as well as a performance report on all “full-serve” positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 model account size. Changes to open positions since the previous report are listed in red text below.
Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.
Notes:
- Per intraday alert, sold MNST and TSCO due to the lack of follow through for a scratch. We also cut back on our position size in IACI by 30%.
Relative Strength Watchlist:
The Relative Strength (or RS) Watchlist makes it easy for subscribers to import data into their own scanning software, such as Tradestation, Interactive Brokers, and TC2000. The list is comprised of the strongest 100 (or so) stocks in the market over the past six to 12 months. The scan is based on the following criteria and is updated every Monday:
- Stock is in a well defined uptrend, trading above both the 50-day and 200-day moving averages, with the 50-day moving average above the 200-day moving average (both moving averages should be in an uptrend as well).
- Today’s close is less than 20% off the 52-week high
- Close is greater than $5.
- Volume is greater than 200,000 shares per day (using a 50-day volume moving average).
Click here to view this week’s Relative Strength Watchlist in excel
Click here to view this week’s Relative Strength Watchlist as a text file