All five major indices closed higher on Tuesday on mixed volume. The S&P 500, the S&P MidCap 400 and the small-cap Russell 2000 all ended the session up by 0.4%. Both the Dow Jones Industrial Average and the Nasdaq followed suit, by posting 0.3% gains on Tuesday. Despite the positive day, the major indices remain mired in a seven day trading range. The longer the market consolidates near the highs, the more likely the next significant move will be up.
Market internals ended the session mixed. Volume on the Big Board fell 2.4%, while it increased by 2.2% on the Nasdaq. Advancing volume outperformed declining volume on both major indices. The ratio was a positive 1.8 to 1 on the NYSE and a plus 1.4 to 1 on the Nasdaq. Light volume on the NYSE prevented yesterday from being classified as an accumulation day. Still, Tuesday was a good showing for the broad market.
The Market Vectors Steel ETF (SLX) undercut its 20-day EMA two days ago in what we refer to as a shakeout move. This type of price action generally serves to “sweep the stops” just below a key support level, prior to a reversal move. This is precisely what happened in SLX as yesterday; this ETF formed a big reversal candlestick. A rally back above the January 5th high of $74.62 could provide a buying opportunity in SLX. For this potential setup to follow through, an increase in volume is likely needed. We are closely monitoring SLX as a buy candidate. As always, an intraday alert will be sent to our subscribers should we decide to take a position in this ETF.
The iShares Nasdaq Biotechnology ETF (IBB) has been consolidating at its 52 week high for the past three weeks. Yesterday, on a burst of volume, this ETF rallied to a new 52-week high before pulling back into support. A move back above yesterday’s high of $95.74 could provide a buy trigger for IBB. If volume holds up and market conditions cooperate, IBB could see a healthy rally. We like this setup and are monitoring it closely.
The recent range bound trading has provided opportunities on both the long and short side of the market. Identifying ETFs with relative strength (long opportunities) and relative weakness (short opportunities), is the key to profitability in a choppy trading environment. Based on yesterday’s price action, the market appears poised for a breakout.
Shares = 200
Trigger = 61.94
Stop = 65.22
Target = 55.20
Dividend Date = n/a
Notes = see commentary from January 11 report
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
There are no changes to our open positions.
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Edited by Deron Wagner,
MTG Founder and