ETFs and market commentary:

Equities dropped on Friday but on light trade. Small cap issues took the biggest hit, as the Russell 2000 lost a key support level at 811 and closed near session lows. The S&P MIdCap 400 shed 0.8% while the Nasdaq and S&P 500 dropped 0.4% and 0.3% respectively. The Dow Jones Industrial Average provided the day’s best showing as it closed just fractionally lower. Airlines, gaming and paper products were Friday’s best performing sectors, while coal, oil services, precious metals and transportation show relative weakness. On the week, the major indices closed mixed.

Market internals were mixed on Friday. Turnover fell by 7.8% on the Nasdaq and 13.5% on the NYSE. Declining volume held the upper hand over advancing volume by a ratio 1.9 to 1 on the NYSE and 1.6 to 1 on the Nasdaq. Friday’s light volume placed a dampening effect on Friday’s decline. Light volume suggests an absence of institutional participation in the day’s action.

Given Friday’s selling pressure, a review of the major indices is in order (see charts below). Recently, the Russell 2000 has demonstrated the most relative weakness. On Friday, the small-cap index lost key support at 811 and now appears headed for the 787 market, which corresponds with the 50-day moving average. If the Nasdaq is going to continue its uptrend, it should hold support at 787. In fact, a pullback into the 50-day MA should offer a buying opportunity in the small-cap Russell 2000.

The S&P MidCap 400 is currently toying with support at 972. If the mid-cap index loses this level, the next key support marks include 960, 945, and 928. Again, since we are still in an uptrend, each of these support levels could offer a buying opportunity.

The Dow Jones Industrial Average undercut its 10-day MA on Friday and if it loses support of this level (12,927), it will likely find it next resting place at the 12,880 mark (20-day EMA). A loss of support at the 20-day MA, would likely result in a move to the 12,735 to 12,740 area for the Dow.

The Nasdaq appears to be showing the most relative strength among all of the indices, as it is has yet to touch its 10-day MA over the past four sessions. However, a move below the 2,960 mark could result in a test of the 20-day EMA (2,910 area).

We exited our remaining open position in PPH on Friday. Overall, we don’t like the price action in the market and decided to book a modest profit. We can always reenter the trade if the opportunity presents itself. Although the market has been weakening as of late, we are still in a confirmed uptrend. Light volume selling as we saw on Friday should not be a cause for concern. We focus solely on distribution days as a warning sign that a market rally is in jeopardy. Although price action has not been favorable lately, distribution days have been held in check.

Today’s ETF Watchlist:

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 DailySubscriber Guide for important, automatic rules on trigger and stop prices

Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.

Notes:

• Per intraday alert, sold PPH for a small gain. Note the change to share size in DJP setup. IYR was removed from the watchlist.

• 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.
  

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Stocks:

Via intraday alert, we established a long position in WFM on Friday as it broke out to new highs. We stopped out later in the day for a small loss when our adjusted stop triggered. We were willing to hold WFA only if the price action remained strong all day, so we raised our stop to just below the 50ma on the 5-minute chart.

The broad market averags have shown some stalling action along with a few days of distribution during the past two weeks. Our very short term plan is to remain in cash (on the stock side) for a few days. If quality setups trigger, then we may decide to take action via intraday alert.

Below are a few setups we are monitoring. These setups are not official and their results will not be tracked. As mentioned above, we will send an intraday alert if any action is taken.

Today’s Stock Watchlist:

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 model account size. Changes to open positions since the previous report are listed in red text below.

Having trouble seeing the position summary graphic above? Click here to view it directly on your Internet browser instead.

Notes:

• Per intraday alert, bought and sold WFM for a small loss.

Relative Strength Watchlist:

The Relative Strength (or RS) Watchlist makes it easy for subscribers to import data into their own scanning software, such as Tradestation, Interactive Brokers, and TC2000. The list is comprised of the strongest 100 (or so) stocks in the market over the past six to 12 months. The scan is based on the following criteria and is updated every Monday:

• Stock is in a well defined uptrend, trading above both the 50-day and 200-day moving averages, with the 50-day moving average above the 200-day moving average (both moving averages should be in an uptrend as well).
• Today’s close is less than 20% off the 52-week high
• Close is greater than $5.
• Volume is greater than 200,000 shares per day (using a 50-day volume moving average).

Click here to view this week’s Relative Strength Watchlist in excel

Click here to view this week’s Relative Strength Watchlist as a text file