market timing model: 

SELL – Signal generated on the close of July 10 (click here for more details)

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 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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closed positions:

Having trouble seeing the closed positions graphic above? Click here to view it directly on your web browser instead.

ETF position notes:

• VWO short entry which triggered yesterday will be closed at market on the open.

stock position notes:

• No trades were made.

ETF and broad market commentary:

Stocks recovered dramatically from session lows yesterday, on higher volume. All five major indices closed lower on the session but well off their worst levels of the day. The S&P 500 contained losses to 0.5% after being as much as 1.2% down on the day. The Nasdaq rebounded from 1.7% loss to finish the day lower by 0.8%. The Dow Jones Industrial Average, S&P MidCap 400 and small-cap Russell 2000 all slipped 0.3%. Still, the S&P 500 fell for a sixth straight day on Thursday, while the Nasdaq fell for the fifth time in five days.

Market internals ended the day on a negative not but yesterday’s action was far from bearish. Volume increased by 5.3% on the Nasdaq and 7.6% on the NYSE, while declining volume held the upper hand on both exchanges. At the close, the ratio of declining to advancing volume stood at a minus 2.5 to 1 on the NYSE and a minus 2.7 to 1 on the Nasdaq. Despite the negative internals, the substantial intraday reversal in price action points to institutional accumulation and not distribution.

Since the market began selling off over a week ago, the iShares Nasdaq Biotechnology ETF (IBB) has show considerable realative strength to the broad market. While the Nasdaq was losing support of both its 20-day and 50-day moving averages, IBB only undercut its 20-day EMA. Further, IBB quickly regained support of the 20-day EMA after undercutting it sharply yesterday. IBB ended the day near session highs. A volume fueled move above $131.01 could present a buying opportunity in this ETF. We are monitoring IBB closely for a possible long entry.

Due to yesterday’s sharp reversal in the market, we will be covering our short position in VWO on the open, at the market. The current market environment has made for difficult trading. As a result of the choppy price action, we are inclined to limit our exposure to the market.

stock commentary:

We have one new official buy setup added to today’s watchlist in IOC. We like the tight ranged consolidation above the 20-day EMA the past few weeks on declining volume. The unofficial buy setup in VRSK remains intact for those still interested (see yesterday’s report for unofficial trade details).

We are taking a small shot with IOC risking about $250 on the trade. The market timing model remains on a sell signal so we plan to keep our exposure very light until conditions improve.

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.

 
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.