market timing model: 

SELL – Signal generated on the close of July 10 (click here for more details)

today’s watchlist (potential trade entries):

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 red 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:

• ZSL buy entry triggered. Please note that we are selling ZSL at market on the next open due to Tuesday’s reversal bar.

stock position notes:

• No trades were made.

ETF and broad market commentary:

Stocks began the session weak but ended strong, on heavier trade. All five major indices formed bullish reversal candles and closed near session highs. The S&P 500 showed relative strength, as it closed up 0.7%. The S&P MidCap 400 and the Dow Jones Industrial Average added 0.6%. The Nasdaq and the small-cap Russell 2000 tacked on 0.5% and 0.4% respectively.

Market internals were, for the most part, bullish yesterday. Volume spiked on the Nasdaq by almost 23.0% and on the NYSE by 17.5%. The ratio of advancing volume to declining volume (spread ratio) on the Nasdaq and the NYSE ened at just over 1 to 1 and 2.5 to 1 respectively. Yesterday’s strong reversal on higher volume resulted in an accumulation day on both exchanges.

On two occasions in the past three days, the Market Vectors Retail ETF (RTH) has tested and held support of its 20-day EMA. Yesterday, on an uptick in volume, RTH formed a bullish reversal candle, as it recovered from an undercut of its 20-day EMA. A volume assisted move above the three day high of $42.52 could provide a buy entry trigger for RTH.

Yesterday, ZSL hit its trigger and we entered the trade. After showing early strength, ZSL reversed dramatically and eventually closed near session lows. This price action led to the formation of a bearish reversal candle. As a result, we will be selling this inverse ETF at the market, on the open tomorrow. When big reversals occur on strong volume, we generally find it advisable to close a position immediately. Given the dramatic reversal in ZSL, yesterday’s high should now serve as a formidable resistance level. UNG remains on the watchlist, as it continues to consolidate above its 20-day EMA. All trade details remain the same for UNG. Refer to the watchlist for trade specifics. Yesterday’s see-saw action in the broad market has become the norm lately. The type of intraday volatility that we are seeing does not bode well for swing trading. As trend traders, it is difficult to extract gains from the market in the absence of consistent price action.

stock commentary:

With yesterday’s heavy volume reversal action in the market we are adding one new long position to the watchlist in GET. This is an early entry, as we are anticipating a break of the downtrend line if the price action can climb above 38.00 and hold.

CRAY is a potential buy entry over yesterday’s high, but it reports earnings on July 26. THLD and TDG are also buyable above yesterday’s high. CRAY, THLD, and TDG are unofficial buy setups (not on the watchlist) so their results will not be tracked.

If you are a new subscriber, please e-mail rick@morpheustrading.com with any questions regarding our trading strategy, money management, or how to make the most out of this report.

 
relative strength watchlist:

Our 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. This list is comprised of the strongest 100 (or so) stocks in the market over the past six to 12 months. The scan is updated every Sunday, and this week’s RS Watchlist can be downloaded by logging in to the Members Area of our web site.