market timing model: Neutral

Current signal generated on close of August 15.

Portfolio long exposure can be anywhere from 30%-50% if you just joined the letter, or up to 100% (if your stocks are holding up).

Past signals:

• Buy signal generated on close of July 11
• Neutral signal generated on close of July 5
• Sell signal generated on close of June 24

(click here for more details)

today’s watchlist (potential trade entries):

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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. Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits. Click here to learn the best way to calculate your share size.

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closed positions:

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ETF position notes:

• No trades were made.

stock position notes:

• No trades were made.

ETF, stock, and broad market commentary:

Stocks established some momentum early, posting gains of 0.5% or so by 1 pm. However, the the morning rally lacked any afternoon punch, as stocks slid lower late in the session, giving back about half of the day’s gains. The NASDAQ, Dow Jones, and S&P 500 stalled just shy of the 20-period EMA on the hourly chart, which is usually the first significant hurdle for a chart to clear when there is a breakdown in the daily time frame.

Since breaking down below the 40-week MA on the weekly chart below for the second time in late July, the iShares Dow Jones US Home Construction ETF ($ITB) has seen very little breathing room, and every short-term bounce from here on out should find resistance from a declining 10-week MA or downtrend line.

With two lower highs and lower lows in place on the daily chart, the reversal of trend in $ITB is already underway. A bounce into the $22 to $22.50 area would be an ideal place for a low risk short, especially if the market puts in a weak bounce off the lows.

Our existing position in First Trust ISE Revere Natural Gas ($FCG) continues to trade in a tight range on the weekly chart, holding above support of the 10-week moving average. The weekly chart really shows how the price action has tightened up since mid-July. From March to June, the average 6-week price swing from high to low was around 14%, but over the past 6-weeks the high to low of the range is slightly less than 5%, so the action has tightened up considerably. Whenever the price action coils up up near the highs of the range (within a long consolidation) it is usually a bullish sign, indicating that a potential breakout is near.

On the stock side, we are sitting tight with existing long positions, as market conditions remain unstable. We feel that there are 3 must own stocks in the market right now, and they are $LNKD, $TSLA, and $KORS. $TSLA is the only stock we do not own of the three, as we missed the low risk entry point on a pullback to $140 above the high of 8/15.

Since $TSLA remains a must own, we continue to monitor the action for a low risk entry point. The daily chart below shows a potential bull flag setup in $TSLA, which needs a few more days at the very least to fill out the flag portion of the pattern. Time plays a big role in our bull flag setups. For example, if a flag pole (the run up) is 7 days in length, we generally want the flag portion (sideways action) to breakout in 7 to 8 days or less (4-6 days is great). We do not want to see a 7 day flag pole with a 15 day flag (no good).

The big problem with this setup is the market. When conditions are not ideal, it is tough to put much faith in stocks breaking out to new highs. So, even if this bull flag plays out as expected, it might be something we pass on or play with very small size.