Is It Over Yet? (SPY) (SMN)


Thursday was a miserable day for Wall Street as bears dominated the market on heavy trade. The only bright note is that stocks did end off session lows. All five major indices closed in the red as the market saw broad based selling. The Dow Jones Industrial Average plunged by 3.5% while the Nasdaq, S&P 500 and small-cap Russell 2000 all slid 3.2%. The S&P MidCap 400 was the only major index that did not eclipse the three percent loss mark as it fell by 2.9%.

For a second time in as many days internals were decisively bearish. Volume spiked by a whopping 35% on the Nasdaq and 39% on the NYSE. Declining volume overwhelmed advancing volume by a ratio of 19.6 to 1 on the Big Board and 12.0 to 1 on the Nasdaq. Given the massive gap down and heavy trade, it is obvious that institutional players were actively involved in the selling. Thursday is easily classified as a distribution day for the broad market as no sectors were spared the carnage.

We exited all of our positions yesterday for sizeable gains. We closed SRS, SMN and EUO to post gains of 15%, 20% and 6.5% respectively. Below we have provided charts of SRS, SMN and EUO that show both the entry and exit prices in each of these trades. Notice that for each trade we patiently waited for legitimate price triggers to enter and we exited all of the trades into the strength of a gap up.

The NYSE has been a very reliable leading indicator in this bear market. The charts below provide some insight into what we expect from the market over the next several days. Only time will tell if our observations are correct.

In order for the market to stabilize and set up the next rally it is likely that we need a capitulation day of 4-5% across all major indices. Typically capitulation involves a massive spike in volume, 800-1000 stocks down four percent or more, 90% down volume, 90% of stocks down on the day and relentless selling into the close. The capitulation day should then be followed by a massive reversal day which catches market bulls off guard. Typically, only with this type of price action, can a bottom be put in the market.

Today’s Watchlist:

There are no new setups for today. We will send an Intraday Alert if any new trades are made.

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

    position summary

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  • Per intraday alert, sold all long positions on the open to lock in significant gains.
  • 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.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader