Commentary:

Stocks rebounded on Monday, but on light trade. All five major indices closed the day in positive territory. The small-cap Russell 2000 led the rally, as it closed the session higher by 0.9%. The S&P 500 and the S&P MidCap 400 both rallied by 0.8% yesterday. The Dow Jones Industrial Average added 0.6%, while the Nasdaq posted a 0.5% improvement.

Market internals ended the day mixed. Volume declined significantly across the board. Turnover fell 18% on the Nasdaq and 16% on the NYSE day over day. However, advancing volume outpaced declining volume on both indices. The ratio of up to down volume ended the day at 2.2 to 1 on the NYSE and 1.4 to 1 on the Nasdaq.

Yesterday, we covered our short position in FRN to lock in a healthy profit. FRN was approaching support at the 200-day MA. Since FRN was close to its target, we felt it made sense to cover the position into weakness.
In Monday’s newsletter we discussed the weakness exhibited by ECH. Yesterday, ECH performed poorly against the market. It closed near the low of the day. A drop below $71.10 should result in additional selling pressure for this ETF. We are placing ECH on the watchlist. For our subscribing members, trade details are posted in the watchlist segment of the newsletter.

The iShares Dow Jones Transportation Average ETF (IYT) has been under significant selling pressure for the past ten days. A move below the January 28th low of $90.06 may provide a short entry trigger for this ETF. We are carefully monitoring IYT as possible short candidate.

Monday’s market action was typical following a sharp round of selling. Market internals suggest that yesterday’s move lacked institutional support. Over the past several sessions it has become increasingly difficult to identify quality long setups. For the moment, it appears as if the market is positioned for further selling.

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Today’s Watchlist:

ECH
Short

Shares = 300
Trigger = 70.97
Stop = 72.67
Target = 67.75
Dividend Date = n/a

Notes = see commentary above

KBE
Short

Shares = 600
Trigger = 25.91
Stop = 26.36
Target = 24.75
Dividend Date = n/a

Notes = see commentary from Jan. 31st report

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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 covered FRN into weakness to lock in gains.
  
  
• 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