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 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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closed positions:

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ETF position notes:

• SOXS buy entry triggered.

stock position notes:

• No trades were made.

ETF and broad market commentary:

Stocks showed promise at the open yesterday but a late wave of selling on higher trade pulled the markets down to session lows. For a second consecutive day, all the major indices closed lower. Larger cap issues showed the most weakness on the day, with the Dow Jones Industrial Average and the S&P 500 losing 0.5% and 0.6% respectively. The S&P MidCap 400 slid 0.4%, while the Nasdaq and the small-cap Russell 2000 fell 0.3% and 0.2% respectively.

Market internals were bearish on Tuesday. Volume spiked on the Nasdaq by 9.7% and on the NYSE by 11.7%. Declining volume easily outpaced advancing volume across both exchanges. On the NYSE the spread ratio finished at a minus 3.7 to 1 and on the Nasdaq it ended at a minus 2.1 to 1. Yesterday was clearly a distribution day on both the NYSE and the Nasdaq. Based on yesterday’s price action, more downside appears to be in store.

Yesterday, on a burst of volume, the Market Vectors Retail ETF (RTH) formed a bearish reversal candle as it rallied to test resistance at its 50-day MA before fading into the close. A volume fueled move below yesterday’s low of 40.90 could offer a short entry trigger for this ETF. We are placing RTH on the watchlist. Trade details are posted in the watchlist section of the newsletter.

The Direxion Small Cap 3x Bear ETF (TZA) is on the verge of breaking above a major resistance level. A rally above yesterday’s high of $20.98 could provide a buying opportunity in this inverse ETF. We are placing it on the watchlist. For trade details, please refer to the watchlist segment of the newsletter.

Yesterday, SOXS hit its trigger and we entered the trade. Although SOXS was under pressure for much of the session, the late day weakness in the market propelled this ETF to its intraday highs. Except for the S&P MidCap 400, all of the major indices lost support resulting in new swing lows. If the broad market is unable to recover quickly on Wednesday morning, we could see a significant selloff.

stock commentary:

We added one new setup to the watchlist today in BRCM. We like the tight price action below the 200-day MA, with the 10,20, and 50-day MAs sloping lower. The entry is below the 5-day low, with the stop above yesterday’s bearish, high volume reversal candle. The price action should not return back above the 34.00 in the short term if the setup is to work out.

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.