Market Rallies on Light Trade ($RTH) ($TZA) ($XLY) ($FAZ)

today’s watchlist (potential trade entries):

today's watchlist

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.

open position summary
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closed positions:

open position summary
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ETF position notes:

  • Closed open positions TZA, RTH, and XLY for a 3% gain in the portfolio.

stock position notes:

  • No trades were made.

ETF and broad market commentary:

Stocks posted strong gains on Monday but on light trade. All of the major indices closed higher on the day. The Nasdaq led the advance as it tacked on an impressive 2.4%. The S&P MidCap 400 and the small-cap Russell 2000 gained 2.2% and 2.3% respectively. The S&P 500 managed a 1.6% advance while the Dow Jones Industrial Average was the day’s laggard. The blue chip index ended the session just 1.1% higher.

Market internals snapped a four day bearish spiral to close mixed on Monday. Volume plummeted on the Nasdaq by 31.0% and on the NYSE by 32.7%. Monday’s turnover was light even when measured against Friday’s options expiration. Advancing volume did however outpace declining volume on both exchanges. By the closing bell the spread ratio stood at a plus 4.8 to 1 on the NYSE and a plus 5.2 to 1 on the Nasdaq.

Since selling pressure hit the market in early May, the Direxion Financial Bear 3x ETF (FAZ) has shown relative strength, as it was one of the first inverse ETFs to break out during the selloff. Yesterday, FAZ managed to hold support at Friday’s low as financials remained weak. An undercut of the 10-day MA and the formation of a reversal candle could offer a buying opportunity in this ETF. We will be monitoring FAZ closely for a potential long entry.

ProShares UltraShort Euro ETF (EUO)(FAZ

We closed our positions in RTH, XLY and TZA for a 3% gain in the portfolio. We are now sitting in a 100% cash position. Monday’s solid price action was overshadowed by the lack of institutional participation in the move higher. For the moment, we remain bearish and will continue to pursue short setups into any market rallies. However, as might be expected following a two week selloff, our research has uncovered virtually no short setups and we anticipate a few days of buying or sideways action prior to any potential move lower. We intend on exercising patience until the next wave of opportunities present themselves. stock commentary:

With the market potentially in bounce mode the next few days we must be patient and wait for new short setups to develop. We definitely want to avoid the long side, as we do not trade counter trend or against our market timing model which remains on a sell signal.

Below is a list of stocks that were are monitoring on the short side. These stocks were former leaders that have put in major tops and are under heavy ditribution by instutions. CRM is a good example of this. CRM was a leading stock in the market from 2009 to 2011. After a nasty selloff in mid-2011, CRM rallied back to the prior high where it stalled out in early 2012. This double top like pattern is an ugly sign for this stock, as it should come under heavy distribution over the nexts 6-12 months.

ProShares UltraShort Euro ETF (EUO)(FAZ



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