market timing model:
Confirmed Buy – Signal generated on the close of September 4 (click here for more details) (we are on a buy signal from the close of Aug. 16)
today’s watchlist (potential trade entries):
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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 $50,000 model portfolios (one for ETFs and one for stocks). Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.
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closed positions:
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ETF position notes:
- No trades were made. Note the new stop prices.
stock position notes:
- Sold BRLI for a solid 10% gain on a short-term hold.
ETF and broad market commentary:
Following through on the previous day’s gains, stocks grinded their way to a higher close yesterday, causing the major indices to close near the middle of their trading ranges of the past several weeks. The S&P 500 Index ($SPX) gained 0.7%, the Dow Jones Industrial Average ($DJIA) 0.6%, and the Nasdaq Composite ($COMPX) 0.5%. The small-cap Russell 2000 Index ($RUT) and S&P Midcap 400 Index ($MID) ascended 0.7% and 0.8% respectively. All the main stock market indexes closed near their intraday highs.
Turnover in the stock market was mixed. Total volume in the NYSE ticked 4% higher, but trade in the Nasdaq was 8% lighter than the previous day’s level. The higher volume gain in the NYSE enabled the S&P 500 to register a bullish “accumulation day,” which occurs when stocks rise on higher volume. However, it would be better if the Nasdaq’s gains also occurred on increasing volume. Although the percentage gains between the NYSE and Nasdaq Composite were similar, the NYSE showed clear bullish divergence in the market internals. In the NYSE, advancing volume trounced declining volume by a ratio of nearly 5 to 1. The Nasdaq ADV/DEC volume ratio was positive by less than 2 to 1.
Recently, we discussed a potential trade setup in Global X Colombia 20 ($GXG), an international ETF that obviously tracks the performance of Colombian stocks. When we first pointed out the potential trade setup last week, we said it may be a little bit too early to enter the trade. However, the price action has tightened up considerably since then, which leads us to believe that a breakout to new “swing highs” will soon occur. On the longer-term weekly chart below, notice that GXG broke out above horizontal price resistance last month, and has been consolidating in a sideways range over the past four weeks. Typically, we like to see ETF price consolidation for at least 2 to 5 weeks before breakout, which increases the odds of the breakout following through to the upside:
Drilling down to the shorter-term daily chart of GXG below, we see that the 20, 50, and 200–day moving averages are all sloping higher and trading above one another. Also, notice that GXG has already formed a significant “higher low.” On September 26, GXG gapped down to “undercut” near-term support of its 20-day exponential moving average (the beige line), which absorbed overhead supply by shaking out traders with their entries or protective stops in the wrong place. Then, one day later, GXG immediately snapped back above its 20-day EMA, and has been trading in a very tight, sideways range since then. As such, we now anticipate GXG to soon break out above its trading range over the past several days and surge to a new “swing high.” Subscribers should note our preset and exact buy trigger, stop, and target prices for this trade setup on ETF Watchlist above.
All four of our existing ETF positions moved higher yesterday, but iShares Philippines Index ($EPHE) is clearly showing the most relative strength of the group. In each of the past three days, EPHE has closed at a new 52-week high. Nevertheless, the broad market continues to show a lack of convincing conviction to the upside. As such, we have raised the stop in EPHE to just below yesterday’s low, in order to protect our substantial gain in the event of a pullback. We have also raised the stop in AMLP. As our other ETF positions move higher, we will trail stops to protect gains along the way as well. In the meantime, any new ETF trade entries will be with reduced position size in order to minimize risk. We are also leaning towards ETFs with a low correlation to the direction of the broad market, such as international, currency, commodity, and fixed income ETFs.
stock commentary:
We sold BRLI yesterday as it hit our target of 32.45, giving us an 11% gain on a six day hold. As for open positions, we raised the stop in AOL to Thursday’s low. Both ONXX and LNKD now have break-even stops. The stop in ARRY remains the same, as it moved out yesterday on a pick up in volume.
NTE reamins on our watchlist with a new entry and stop price due to Thursday’s bullish reversal bar action:
If you are a new subscriber, please e-mail [email protected] 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.