Market Reverses Sharply ($QQQ, $SPY, $ZSL)

market timing model:


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 red shaded cells below. 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:

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ETF position notes:

  • ZSL trade was cancelled on the open due to gap up of more than 1.3% above the trigger.

stock position notes:

  • CRM short position triggered.

ETF and broad market commentary:

Stocks reversed sharply to close mostly higher yesterday, as they recovered from significant early session losses. Except for the Dow Jones Industrial Average, the major indices all closed higher. The small-cap Russell 2000 led the recovery as it posted a 0.7% gain. The S&P MidCap 400 and the Nasdaq tacked on 0.6% and 0.4% respectively. The S&P 500 added a modest 0.2%, while the DJIA closed fractionally lower on the day. The NYSE also closed fractionally lower.

For the first time in quite a few sessions, market internals were bullish across the board. Turnover on the Nasdaq rose by 4.3% and on the NYSE by 1.1%. Advancing volume outpaced declining volume by a ratio of 1.6 to 1 on the NYSE and 1.2 to 1 on the Nasdaq. For a second day in a row, market internals were mixed. Turnover on the Nasdaq fell 0.4% but increased on the NYSE by 8.8%. However, declining volume edged out advancing volume on the Nasdaq and the NYSE by ratios of 1.4 to 1 and 1.1 to 1 respectively. The 0.4% advance on the Nasdaq combined with yesterday’s higher volume resulted in an accumulation day for the high-tech index. Although neither the S&P 500 nor the NYSE closed higher on the day, the magnitude of the reversal combined with the slightly higher volume should likely be viewed as accumulation for both of these indices also.

Based on yesterday’s price action, it appears as if we will see a move higher in the broad market over the next several days. However, there is still considerable overhead in store for market bulls. The charts of the SPDR S&P 500 ETF (SPY) and the ProShares Nasdaq ETF (QQQ) below, show the next significant resistance levels for both ETFs and are self explanatory. We will likely be looking to establish new short positions when these indices approach these resistance levels.



Yesterday, ZSL gapped more than 1.3% above its trigger and based on our gap rules, the trade was cancelled. Based on yesterday’s sharp reversal, the gap-up rule appears to have kept us out of harm’s way. If nothing else, ZSL may offer a better entry if the market remains weak. We cannot stress enough the importance of following the well defined trading rules. As yesterday clearly demonstrates, market sentiment can reverse quickly. We went from what was shaping up to be a distribution day, to an accumulation day by the close. However, we do not have a buy signal in the market yet and we remain bearish on the market. This could also change quickly if the market posts another significant accumulation day sometime next week. For the moment, we anticipate shorting opportunities to develop as the market bounces.

stock commentary:

Per yesterday’s watchlist, CRM triggered a short entry on the open but closed strong along with the broad market averages. Unfortunately, our timing may be off on the CRM entry due to yesterday’s bullish, heavy volume reversal candle on the S&P 500 and Nasdaq. The reversal should spark a short-term relief rally over the next few days. There is no change to our stop.


With the market potentially in bounce mode, we want to avoid establishing new shorts for a few days and wait for low-risk setups to emerge. One potential short setup we are monitoring is GOOG:


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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.