Is the Market Building a Base? ($XLP) ($AAPL)

today’s watchlist (potential trade entries):

today's watchlist

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.

open position summary
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closed positions:

open position summary
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ETF position notes:

  • Note the updated stop prices in DUST and SOXS.

stock position notes:

  • XLNX hit our target at 33.51 and we are out with a small gain.
  • TISA is listed 2x due to the split stop.

SPECIAL NOTE: The only gap rule we are now using applies strictly to entries, where a setup is automatically cancelled if it opens more than 1.3% above or below the trigger price. For example: If the trigger on a buy setup is $20.00 and the price opens higher than 20.26 (20.00 x 1.013%), then the trade is automatically cancelled. As a reminder, when a stock gaps below the listed stop price we automatically sell the stock “at the market” on the open. 

ETF and broad market commentary:

Stocks ended the day mixed on light trade. The small-cap Russell 2000 led all of the major indices as it posted a 0.8% gain. The Dow Jones Industrial Average gained 0.6%, while the S&P 500 and S&P MidCap 400 rose by 0.4% and 0.3% respectively. The Nasdaq was Tuesday’s sole loser, but APPL’s after hours earnings surprise propelled the Nasdaq Futures higher by 1.5%.

For the second time in as many days, internals ended the session mixed. Volume slid 4.9% on the Nasdaq and 3.7% on the NYSE. However, declining volume topped advancing volume by a factor of 1.2 to 1 on the Nasdaq, while advancing volume beat declining volume by a ratio of 2.4 to 1 on the NYSE. Little useful information can be gleaned from yesterday’s internals, particularly in light of the Nasdaq Future’s big afterhours move.

The S&P Consumer Staples SPDR ETF (XLP) has demonstrated excellent relative strength to the broad market during the most recent correction. Notice that as the S&P 500 has lost support of its 20 and 50-day moving averages, XLP has held support at its 20-day EMA. Further, XLP has spent the last three weeks forming a base. Although XLP does not currently offer a buy entry, with two or three more weeks of basing action, this ETF could become an excellent long opportunity. The ideal price action would involve XLP setting a sequence of lower highs and higher lows over the next several weeks and then forming a reversal candle to provide the ideal “buy pivot”.

S&P Consumer Staples SPDR ETF (XLP)

We’re raising our stops in both SOXS and DUST in order to protect gains. Market conditions demand tight management of all positions. Details of the revised stops are available in the open positions section of the newsletter. As of this writing, the Nasdaq futures are up by 1.5%. If this gap holds, it could pull all of the major indices back into the middle of their respective trading ranges. Further, this could be a signal that the market is in base building mode and that another rally could potentially be several weeks away.

stock commentary:

With our market timing model sitting on a sell signal all we can do is be patient and continue to scan for emerging setups. Getting long ahead of the timing model has not produced great results in the past, as setups have very low odds of following through when conditions are not ideal (a winner becomes a needle in a haystack). On the short side, there isn’t much to do if the market holds the potential gap tomorrow and rallies from oversold levels.

We took profits in XLNX and locked in a small gain. On the long side we are monitoring VVUS for a breakout entry, but the setup is not official. The pattern is pretty tight overall, its just that the market is not in our favor.




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