Commentary:

Stocks finished down on Thursday, and for the second straight day volume was mixed. All five major indices lost ground, but a late session rally kept the losses to a minimum. The Dow Jones Industrial Average and the S&P 500 both fell 0.2%, while the Nasdaq, S&P MidCap 400 and the small-cap Russell 2000 all shed 0.1% on the session.

Volume on the Nasdaq increased by 2.8%, while on the NYSE it fell by 3.3%. Declining volume overshadowed advancing volume on both the NYSE and the Nasdaq. The ratio of declining to advancing volume ended the day at 1.6 to 1 on the NYSE and 1.1 to 1 on the Nasdaq.

Yesterday we sent an intraday alert that we were taking a short position in EPU. We discussed EPU in yesterday’s newsletter stating that it exhibited relative weakness during Wednesday’s market rally. Further, we suggested two potential entry setups as follows; “A rally back into resistance at these key moving averages, or a drop below the January 10th low of $46.85, may present an opportunity to short EPU”. EPU chose the latter option. For those of you unable to short EPU, an alternative trade is to buy the ProShares UltraShort MSCI Emerging Markets ETF (EEV). However, this ETF is not directly correlated to EPU. Both GDXJ and GDX performed admirably during yesterday’s selloff. GDXJ and GDX fell 3.8% and 3.2% respectively.

The PowerShares DWA Emerging Markets Technical Leaders ETF (PIE) has been consolidating in a bullish pennant-like pattern for the past 11 weeks. A volume powered rally above $18.72 offers a potential long entry trigger in this ETF. We are Placing PIE on the watchlist. For are regular subscribers, trade details can be found in the watchlist segment of the newsletter.

Although stocks finished down yesterday, the losses were minimal and most of Wednesday’s gains were preserved. The market continues to rally on light volume and we continue to see the erosion of former market leaders. Gold and emerging market ETFs have come under significant selling pressure lately. Money is rotating into formerly weak sectors. Further, it has become much easier to take short positions over the past month. All of these are signs that a market reversal may be close at hand.

In observance of Martin Luther King Day, there will not be a newsletter published on Monday, January 17th. The next issue of The Wagner daily will be published on Tuesday, January 18th.

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Today’s Watchlist:

PIE
Long

Shares = 800
Trigger = 18.76
Stop = 17.94
Target = 20.60
Dividend Date = n/a

Notes = see commentary above

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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

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Notes:

• 
  Per intraday alert, we established a short position in EPU. As mentioned in the notes section of Thursday’s report, we sold 600 shares of PBW at 9:35 am (10.97). We still have 1,000 shares remaining with no change in stop.
  
  
• 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.
  
  
• For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.

Edited by Deron Wagner,
MTG Founder and
Head Trader