Commentary:

Stocks closed sharply lower on Tuesday on increased volume. After a gapping up to start the session, stocks sold off in an efficient stair-step like manner for the entire day. All five major indices gave back all or most of the two day rally, and closed near the session lows. on Monday on improved volume. All five major indices ended the day higher with the Dow Jones Industrial Average leading the rally. The small-cap Russell 2000 suffered the most damage as it slid 2.4% yesterday. The S&P MidCap 400 lost 1.7%, while the S&P 500 and the Nasdaq both fell 1.6%. The Dow Jones Industrial shed 168 points or 1.4%.

Tuesday’s market internals were bearish thus suggesting institutional distribution. Volume was modestly higher across the board. Turnover increased on the NYSE by 6.3% and on the Nasdaq by 10.5%. In a reversal of Monday’s action, declining volume overwhelmed advancing volume by a ratio of 8 to 1 on the NYSE and 5 to 1 on the Nasdaq.

In Tuesday’s newsletter we presented two potential short setups for EWY. We stated, “the first scenario was discussed in Monday’s newsletter, and the second scenario would be to short EWY below the February 24th low of $57.17“. On a day of wild price action, EWY traded at both extremes of its six day trading range (see chart). We are placing EWY on the watchlist. A move below the February 24th low of $57.17 may provide a short entry trigger for EWY. For our subscribing members, trade details are posted in the watchlist segment of the newsletter.

The SPDR S&P Homebuilders ETF (XHB) closed near the session low on Tuesday. A break below the five day low of $17.27 could present a shorting opportunity in this ETF. We are adding XHB to the watchlist. Trade details are available in the watchlist section of the newsletter for our subscribers.

For EWY and XHB a modest gap up may also provide a potential short trigger. In the event that such price action provides a shorting opportunity, we will send an intraday alert to our membership.

With volatility comes uncertainty. Typically, when uncertainty surrounds the market institutional money moves to the sidelines. Our current market bias has shifted toward neutral, but all five major indices still remain above their respective 50-day moving averages. Further, the uptrend for each remains intact. Still, we are of the opinion that a trend reversal may be near.

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Today’s Watchlist:

EWY
Short

Shares = 400
Trigger = 57.06
Stop = 58.37
Target = 53.55
Dividend Date = n/a

Notes = see commentary above

XHB
Short

Shares = 1,000
Trigger = 17.23
Stop = 17.77
Target = 16.10
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:

• We remain in a 100% cash position, but we now have two short candidates on the watchlist.
• 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