Commentary:

Equities posted strong gains on Monday but once again trade was soft. All five indices added more than 1.5% with the small-cap Russell 2000 leading the charge. By the closing bell the Russell had tacked on an impressive 3.0% while the S&P MidCap 400 gained 2.7%. The S&P 500 added 2.2% while both the Nasdaq and the Dow Jones Industrial Average improved by 1.9%.

Despite the market’s strong price performance, market internals were weak for a second consecutive day. Volume fell sharply across both exchanges. On the Nasdaq turnover dropped by 13.2% and on the NYSE by 16.5%. However, advancing volume outpaced declining volume by a ratio of 26 to 1 on the NYSE and 8.4 to 1 on the Nasdaq. The absence of volume from the market creates concern as to the strength of this rally and strongly suggests that Institutions are shying away from this move. The lack of institutional participation implies the need for caution on the long side of the market.

During the recent market reversal the iShares S&P Latin America Index ETF (ILF) lost support of a key 10-month consolidation zone near $48.85. ILF has since rebounded and is now rallying into resistance of its 20-day EMA. An overcut of this key mark accompanied by a reversal candle could present a shorting opportunity in ILF. Also, notice that ILF faces formidable resistance as both the 50-day and 20-day moving averages have bearishly crossed below the 200-day MA.

Since recently losing support of its 200-day MA the SPDR S&P Retail ETF (XRT) has been exhibiting relative weakness to the broad market. Notice that XRT has been unable to break out of its five day trading range while both the S&P 500 and the Nasdaq have already done so. A move back into the 200-day MA could provide a short entry trigger for this ETF.

We were stopped out of our long position in BZQ yesterday as it gapped down and eventually lost the 20-minute low. We patiently waited for nice pullback to enter the trade but in volatile markets, timing is everything. We still like the trade but must now wait to see if a potential re-entry point presents itself.

The absence of volume during the recent bounce suggests that the market may be living on borrowed time. All of the major indices are rapidly approaching key resistance levels and unless institutional players begin participating in this rally, we expect to see a sharp reversal soon.

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Today’s Watchlist:

There are no new 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:

• Per intraday alert, BZQ stopped out beneath the 20-minute low. When an ETF gaps down to our stop on the open we ignore the original stop and place a new stop 15 cents below the 20-minute 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