Commentary:

Stocks staged impressive gains and closed near session highs on Monday as trade fizzled. All five major indices posted gains of three percent or more with small-cap stocks leading the charge. The small-cap Russell 2000 closed up a whopping 4.4%. The tech rich Nasdaq added 3.5% while the S&P MidCap 400 and the S&P 500 both improved by 3.4%. The Dow Jones Industrial Average tacked on 3.0%.

Market internals were mixed for the fourth consecutive day and must be strongly considered when interpreting the day’s positive price action. Volume plummeted on both exchanges by a massive 24.0% but advancing volume overwhelmed declining volume by 16.7 to 1 on the NYSE and 7.0 to 1 on the Nasdaq. The anemic volume speaks clearly to the absence of institutional participation in Monday’s rally. Since the reversal day last Tuesday the market has still not posted a follow through accumulation day. For the moment it appears as if the current rally may be nothing more than a house of cards.

Over the past two weeks the Nasdaq 100 Index ($NDX.X) has shown relative strength to the broad market but is now approaching major resistance at its 200-day MA. An overcut of and reversal back below this key mark could provide an early signal that the current rally is reaching exhaustion. We will be monitoring the Nasdaq 100 closely for signs of a reversal.

Over the past five sessions the ProShares UltraShort FTSE China 25 ETF (FXP) has been selling off and has now pulled back into support near its 20-day and 50-day moving averages. We are now awaiting the formation of a reversal candle to provide a possible long entry signal for this ETF.

Five days of rallying on light volume is far from what the market needs to reverse the current bear market trend. Without institutional participation it’s unlikely that this advance can hold up much longer. Light volume rallies are indicative of bear market bounces.

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Today’s Watchlist:

There are no new official setups this morning. 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:

• Per intraday alert, we raised our stop in SRS to just below the two day low. Into the close the stop was hit and we exited the trade for a small loss. We cancelled the EEV long setup due to yesterday’s breakdown below the 10/7 reversal bar low.
• 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