Commentary:

Stocks were down across the board on Friday as trade increased. Price action was whippy as stocks lost ground early, reversed in the midmorning to reclaim session highs by 2pm but dropped once again to close in the lower third of the intraday range. By the closing bell all five manor indices were firmly in the red. The small-cap Russell 2000 slid 1.1% while the S&P MidCap 400 and the S&P 500 both dropped 0.8% on the day. The Nasdaq and the Dow Jones Industrial average both shed 0.7% by the closing bell.

Market internals cast a bearish shadow over the market on Friday. Volume increased on both exchanges as would be expected on an options expiration day. Turnover was up by 15.2% on the Big Board but only marginally higher on the Nasdaq. Declining volume outpaced advancing volume on the Nasdaq by a ratio of 2.2 to 1 and on the NYSE by a factor 2.7 to 1. Despite only a modest increase in volume on the Nasdaq we would still classify Friday as a distribution day for the market.

Yesterday we entered a long position in the UUP and a short position in IWM via intraday alerts. For our subscribing members, trade details are posted in the open positions segment of the newsletter.

After attempting to reclaim support of its 50-day and 20-day moving averages, the iShares MSCI EMU Index ETF (EZU) reversed sharply on Friday as it gapped down, sold off and closed near the lows of the session. A volume fueled move back below yesterday’s low of $38.66 could result in further distribution in this ETF.

Since gapping down on May 17th the PowerShares India Portfolio ETF (PIN) has exhibited relative weakness as it was unable to move higher with the market during the recent reversal and two day rally. Further, INP has been consolidating at its recent swing low for the past four sessions. A move below May 18th low of $22.16 may provide a short entry trigger for this ETF.

The broad market saw its seventh distribution day in the past four weeks on Friday which suggests the market is continuing to weaken. Given the recent selling into strength a follow through to the downside on Monday could be the start of a difficult week for the market.

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Today’s Watchlist:

There are no new official setups for today. We will send an Intraday Alert if any new trades are made.

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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 intrady alert, we bought the U.S. Dollar Bull Index (UUP) and sold short the Russell 2000 (IWM).
• 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