Bears dominated early trading as stocks plummeted at the open on Monday. All of the major indices traded down over 1.2% in the morning session. But, at 10:00 am the markets stabilized and consolidated until the late afternoon. At the 2:30 pm reversal period, the markets staged an impressive reversal that lasted until the last 10 minutes of trading, at which point stocks were met with a volume fueled wave of selling. For the session, the Nasdaq and the Dow Jones Industrial Average both fell 0.4%. The S&P MidCap 400 shed 0.2%, while the S&P 500 and the small-cap Russell 2000 almost made it back into positive territory. Both finished down a mere 0.1% for the day.
Turnover was up significantly compared to Friday’s holiday shortened session. But on a relative basis yesterday’s volume was modest, as it was unable to reach the 50-day volume moving average on either the NYSE or the Nasdaq. Nasdaq volume was up 164% day over day. Turnover on the NYSE closed up 103%. Declining volume outpaced advancing volume on both indices on Monday. The ratio was 1.1 to 1 on the NYSE and 1.5 to 1 on the Nasdaq.
Yesterday’s price action on the Dow Jones Industrial Average could qualify as shakeout move. It is not uncommon to see an undercut of a major moving average during a pullback in an uptrend. A decline below a key moving average that reverses quickly, “sweeps” the weak hands from the market and often results in a short squeeze that fuels the next advance. It is too early to tell whether or not this is the case for the Dow, but it does serve as an important signal that must be closely monitored. Under no circumstance do we trade from this signal in isolation. The price action over the next several days must be used in conjunction with the possible shakeout candle to determine whether or not the odds favor the resumption of the prevailing trend. For example, a big volume gap up at today’s open would be a good indication that the uptrend may continue. A gap up after yesterday’s reversal would likely create a state of panic among bears.
The iShares Silver Trust ETF (SLV) has maintained excellent relative strength during the most recent market decline. Over the past 17 trading days, this ETF has consolidated above the 20-day EMA and formed a bullish pennant-like technical pattern. Further, the undercut and subsequent gap-up above the 20-day exponential moving average provide evidence that SLV may be preparing for another advance. A surge above the November 22nd high of $27.22 provides a possible long trigger for SLV.
We are placing the iShares MSCI All Peru Capped Index Fund (EPU) on the watchlist. After a significant undercut of the 20-day EMA on November 16th, EPU gapped back above this key technical mark two days later. Since then, EPU has consolidated for seven days in a very tight trading range. A breakout above the November 22nd high of $48.71 provides a likely buying opportunity. For our subscribers, the details of this trade can be found in the watchlist portion of the newsletter.
For the ninth consecutive day, the market has exhibited a lack of direction. However, ETFs that have been leading the market responded appropriately by maintaining relative strength. Further, it can be argued that the strongest ETFs showed signs of institutional accumulation. These include oil services/related, precious metals, emerging markets and energy/related.
Shares = 400
Trigger = 48.84
Stop = 47.43
Target = New highs (will trail stop)
Dividend Date = n/a
Notes = see commentary above
Shares = 700
Trigger = 18.20
Stop = 17.43
Target = New 52-week hIgh (will trail stop)
Dividend Date = n/a
Notes = see commentary in November 29 issue
Daily Performance Report:
Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices
BZQ hit our trigger price and we took a long position yesterday.
- Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
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Edited by Deron Wagner,
MTG Founder and