today’s watchlist (potential trade entries):
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 a pink shaded cell below. New entries are shaded in green cells. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.
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ETF position notes:
- XLY and RTH short entries triggered.
- Sold SOXS as it hit our target for a 12% gain.
stock position notes:
- BJRI short entry triggered.
- Note that the target in BRCM has been changed to CO, which means close the position at the market on the open. We are doing this to lock in gains in case BRCM reverses before hitting our trigger.
ETF and broad market commentary:
Stock got hammered on Thursday, marking the fourth consecutive day of declines. All five major indices lost more than 1.0%. The S&P MidCap 400 led the decline as it plummeted 2.5%. The small-cap Russell 2000 dropped 2.3%, while the Nasdaq slid 2.1%. The Dow Jones Industrial Average and the S&P 500 fared slightly better as they gave back 1.2% and 1.5% respectively. Only six of the 105 sectors that we track closed higher on the day. Only precious metals and gold miners managed to finish higher by a significant amount.
For a third time in as many days, market internals were bearish. Yesterday’s price action was particularly negative as all of the major indices opened at session highs and closed at session lows. There was virtually no reprieve from the selling pressure throughout the day. Volume spiked by 5.2% on the Nasdaq and by 8.6% on the Nasdaq. Declining volume overwhelmed advancing volume by a margin of 7.7 to 1 on the NYSE and 6.0 to 1 on the Nasdaq. Clearly, institutions were dumping stocks.
Since March of this year, the ProShares UltraShort Silver ETF (ZSL) has reversed its downtrend and reclaimed the 20-day, 50-day and 200-day moving averages. A pullback to and undercut of the 200-day MA could present a buying opportunity for this ETF.
We closed our long position in SOXS yesterday, for an impressive 12.0% gain. TZA rocketed higher and we are now over 7% in the money on this trade. RTH triggered yesterday and we entered a short position in this ETF. RTH closed at the dead lows of the session. XLY triggered yesterday and sold off sharply throughout the day. By the close, we were up 2.4% in this ETF. We will be looking to take profits today as we are both tightening stops and adjusting targets. Now is not a time to get greedy rather, it is time to take profits. If you missed this move lower, we caution against chasing the market.
Thursday was a difficult day for Wall Street. Until yesterday, for the most part, the major indices were grinding lower but showing few signs for panic or fear. Yesterday’s onslaught changed all of that. We witnessed the first signs that the market may be approaching capitulation. In order for a market to recover from a bearish trend, selling pressure must overwhelm the market on a big spike in volume. Only when bulls are completely washed from the market can a reversal occur. However, for the moment, we remain bearish on the market and will continue to look for shorting opportunities into any bounces until our market timing model provides a buy signal.
With BRCM following through to the downside yesterday, we plan to cover the position at market on the open to lock in gains. The BJRI short setup triggered and worked out nicely as well. We raised the stop in BJRI to break-even in case the market reverses higher within the next day or two. Our scans did not reveal much in the way of low-risk shorts which isn’t a surprise considering that most stocks are down over the past few days. We plan to lay low with regard to new short entries until we see a decent bounce in the broad market averages.
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