Commentary:

Stocks moved higher on Tuesday but closed well off session highs. The five indices that we track all posted gains but an afternoon slide to took some of the luster off the day’s action. The Nasdaq fared the best as it gained 0.6%, and was followed closely by the Dow Jones Industrial Average. The blue chip index tacked on 0.5% by the closing bell. In stair step like fashion, the S&P 500, S&P MidCap 400 and the small-cap Russell 2000 added 0.4%, 0.3% and 0.2% respectively.

Internals were mixed yesterday as volume slipped 0.3% on the NYSE but climbed almost 8.0% on the Nasdaq. Advancing volume held the open hand over declining volume for a second consecutive day. By the closing bell, the spread ratio stood at a plus 1.3 to 1 on the NYSE and a plus 1.6 to 1 on the Nasdaq. Although volume and advancing volume were both positive on the Nasdaq, we didn’t like the price action in the market. Therefore, we would not consider yesterday an accumulation day on the Nasdaq.

Over the past four sessions the S&P Select Financial SPDR ETF (XLF) has attempted unsuccessfully to reclaim its 200-day MA and break rally above its long term downtrend line that began in February 2011. Yesterday, XLF formed a reversal candle and closed below both of these key resistance marks. Further, over the past two sessions, XLF has for the first time in several weeks, begun to exhibit relative weakness to the broad market. A move below yesterdays low of $13.66 could provide a shorting opportunity in this ETF. Although we are not placing SKF on the watchlist (nor are we inclined to go short), XLF could provide a quick trading opportunity. Tthe ProShares UltraShort Financial ETF (SKF) is a potential inverse proxy for XLF.

The Market Vectors Gold Miners ETF (GDX) has been one of the weakest exchanged traded funds in the market for several months now. Yesterday, on a pick-up in volume, GDX formed a bearish “engulfing” reversal candle, as it opened at the high and closed virtually at the dead lows of the session. Move move below yesterday’s low of $52.86 could present a short entry trigger for this GDX. This ETF has better potential as a short entry since it is a sector that tends to trade in lockstep with the price of gold. Since gold is less correlated to the market than an equity ETF, GDX will generally present less risk when counter-trend trading. DUST is the inverse gold miners ETF. We may consider entering this trade for a “quick pop” should market conditions become favorable to do so. However, for the moment, GDX is not an official setup.

Yesterday proved to be a “gap and trap” session. However, this type of price action is understandable given that stocks have been rallying since December 20th. We would welcome a modest pullback in the market as it could provide buying opportunities in some of the stronger sectors such as pharmaceuticals and biotechs. Although we are bullish we must remain attentive of our positions if a pullback occurs. Should the market pull back, we will look to pare any positions that show signs of relative weakness.

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Today’s Watchlist:

There are no official setups for today. As always, we will send an intraday alert if any new trades are made.

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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 Daily Subscriber Guide for important, automatic rules on trigger and stop prices

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Notes:

• We are cancelling the XRT setup, as it appears a better trigger might develop. Two new long positions triggered from the watchlist yesterday (IYR and IXN). Both were able to rally above their respective five minute highs following the morning gap up and trigger a buy entry. For the moment, all stops remain the same. We are now in a total of five long positions.
• 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 support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.

Edited by Deron Wagner,
MTG Founder and
Head Trader