Commentary:
Stocks traded off sharply on Tuesday, as all major indices fell one percent or more. The markets gapped down at the open, found footing around 11:30 am, and consolidated at the lows for the remainder of the session. The DJIA is on the brink of losing a critical six day support level. The small-cap Russell 2000 and the S&P MidCap 400 were the most resilient, but they still shed 1% and 1.1% respectively. The Nasdaq led the decline by shedding 1.5%. Close behind were the Dow Jones Industrial Average and the S&P 500. The Dow slid 1.3%, while the S&P 500 ended the day down 1.4%. Losses were widespread across virtually all industry groups.
Volume was up on Tuesday. The NYSE saw a significant increase in volume of 13%, while Nasdaq volume was up only slightly. However, both indices experienced significant selling pressure, as declining volume overwhelmed advancing volume on the session. On the NYSE down volume overshadowed up volume by a 10 to 1 ratio. The Nasdaq saw declining volume outpace advancing volume by a factor of 5 to 1. Given the internals and the price action, Tuesday was clearly a distribution day.
Although we don’t regularly track the NYSE, it is of significance that it closed below its 50-day MA for the first time since late August. The DJIA is also toying with a key support level. For the third time in the past six trading days, the Dow dropped below 11,000 but managed to rally back to close above this key mark. A break below the six day low of 10,978 would likely result in further broad based distribution. The next significant support below the November 16th low is 10,750. A lesser support level exists at 10,870. Despite the strong selling, this is just the first test of the 50-day MA in almost three months. Given the length of the most recent advance, the current price action is not particularly unusual or unexpected.
In the November 23rd newsletter we stated, “The market continues to show indecision. Choosing trade setups that are exhibiting relative strength or relative weakness when the market is in flux, provides the opportunity to enter a position without taking on exorbitant risk in the event of a sharp reversal. Further, if the market remains in a trading range, strong ETFs will generally rally and weak ETFs will generally decline.” This comment was made in reference to the relative weakness exhibited by the iShares MSCI Spain Index ETF (EWP), and the relative strength demonstrated by the JPMorgan Alerian MLP Index ETN (AMJ). We placed both on the watchlist. Unfortunately, the short entry trigger for EWP was nullified because it gapped more than 1% below our price trigger. Market volatility often makes it difficult to enter quality setups. On the other hand, AMJ demonstrated tremendous relative strength on Tuesday. Irrespective of the heavy selling in the market, AMJ held its four day trading range and closed near the intraday high. Further, at no time during this market correction has AMJ closed below the 20-day MA.
Due to market conditions, many potential setups have been neutralized. Further, we are not inclined to make new calls going into the holiday. There are no new watchlist candidates for today’s newsletter.
NOTE:The U.S. markets will be closed Thursday, November 25, in celebration of Thanksgiving Day, and will finish at 1:00 pm ET on November 26. Accordingly, The Wagner Daily will not be published on Thursday, and an abbreviated version will be sent on November 26. Enjoy the holiday with your family and friends.
Today’s Watchlist:
KOL
Long
Shares = 250
Trigger = 44.35
Stop = 41.92
Target = New highs (will trail stop)
Dividend Date = n/a
Notes = see commentary in Nov. 23 issue
NBB
Short
Shares = 500
Trigger = 19.44
Stop = 19.77
Target = 18.00
Dividend Date = n/a
Notes = see commentary in Nov. 22 issue
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
EWP was removed from the watchlist due to yesterday’s large gap down below our trigger price.
- 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 [email protected] if not already set up for this value-added feature we provide to subscribers.
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Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader