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 red shaded cells below. 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:
- Note the change in stops.
stock position notes:
- No trades were made.
ETF and broad market commentary:
On a day of see saw price action, stocks closed higher on mixed trade. Stocks gapped up at the open, sold off during the first hour of trading, and then rallied the remainder of the day to close near session highs. The small-cap Russell 2000 was the day’s biggest winner, as it posted a 1.4% gain. The Dow Jones Industrial Average tacked on 1.3%, while both the Nasdaq and the S&P 500 advanced 1.2%. The S&P MidCap 400 finished higher by 1.1%.
Internals ended the session mixed. Volume rose on the Nasdaq by 7.3% but fell on the NYSE by just over 1.0%. The ratio of advancing volume to declining volume ended the day at 6.0 to 1 on the NYSE and 3.8 to 1 on the Nasdaq. Based on Tuesday’s price and volume action, the Nasdaq posted an accumulation day. The NYSE did not post an accumulation day due to its lighter, day over day volume.
For five days now, the broad market has ping-ponged back and forth in a tight range. A quick review of the major averages should help to shed some light on the current state of affairs in the market.
The Nasdaq, small-cap Russell 2000 and S&P MidCap 400 have all struggled to reclaim their respective 20-day EMA’s, while the S&P 500 and the DJIA have shown some relative strength compared to the other indices. As of the close yesterday, both of these indices were trading above the 20-day EMA.
Nasdaq: The Nasdaq has resistance has resistance near 2885 and support near 2800. If the Nasdaq rallies above 2885, the next resistance is at the 50-day MA. Below 2800, the Nasdaq should find support at the previous swing low.
S&P 500: The S&P 500 has resistance at 1335 and support at 1305. Above 1335, the next resistance on the S&P 500 is at the 50-day MA. The next support on the S&P 500 is the prior swing low of 1266.
DJIA: The next resistance on the DJIA is from 12610 to 12650. Above 12650, the Dow will find resistance at its 50-day MA. The next support on the Dow is at the 200-day MA and the June 4th swing low.
S&P MidCap 400: The S&P MidCap 400 should find resistance in the 933 – 936 range, and support at 903. Below 903, this index has support at the previous swing low (882). Above 936, the S&P MidCap 400 should see resistance at the 50-day MA.
Small-cap Russell 2000: The next resistance on the Russell is at 776. Above that, the Russell should find difficulty getting through the 787 mark. Yesterday’s low of 748 is the first line of support on the Russell. If the Russell move below this level, its next support is at the June 4th swing low of 729.75.
Due to the lack of follow through to the short side yesterday, we are tightening the stops on our open positions in DUG, FAZ and TYP in order to reduce risk. We are also selling partial size in each position at the open. Here are the details for each trade: Selling 150 shares of DUG at the market on the open, leaving 200 shares of DUG still open, selling 70 shares of FAZ at the market on the open, leaving 100 shares of FAZ still open, Selling 200 shares of TYP at the market on the open, leaving 400 shares of TYP still open (SEE OPEN POSITIONS SECTION OF NEWSLETTER FOR NEW STOPS FOR EACH TRADE) Although the market performed well yesterday and the Nasdaq managed to post an accumulation day, the price action was not as dramatic as Monday’s move, and volume ended the day mixed. Further, total volume on both the NYSE and the Nasdaq has remained well below the 50-day moving average. This has likely contributed to the lack of commitment in the price action over the past few days. The market is obviously struggling to find a direction and we must navigate carefully under these conditions. Our utmost concern is to preserve capital in this choppy environment.
We lowered the stops on existing short positions two days ago so we have on a minimal amount of risk if the price action does not go in our favor. Although we do not have a buy signal in place as of yet, there are plenty of stocks acting well (see list below).
If our timing model generates a buy signal this week we will probably take on a few small long positions to test the water. We plan on keeping our long exposure below 50% (of equity) until the Nasdaq Composite breaks above the 50-day MA and holds. There is the potential for the market to produce a false buy signal and then sell back off. This is why we keep our position size small until there is more evidence.
Top long candidates we are monitoring: LQDT AFFY AVD CHSI REGN AMLN CRAY SWI LF EQIX HSTM WWWW MDSO SXCI VVUS ALXN CERN ATHN EBAY
If you are a new subscriber, please e-mail [email protected] with any questions regarding our trading strategy, money management, or how to make the most out of this report.
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.