Potential short setup in (SMH)


Stocks rebounded on Friday but trade was light. All the major indices closed higher yesterday with the S&P 500 and the S&P MidCap 400 showing the most improvement. Both indices advanced by 0.7% for the session. The Nasdaq and Dow Jones Industrial Average followed closely, as both rallied by 0.5% on Friday. The small-cap Russell was Friday’s laggard as it could only muster a 0.3% improvement.

Market internals ended the session mixed. Turnover was down across the board as it plummeted by 22% on the Nasdaq and 18.2% on the NYSE. However, the ratio of advancing to declining volume was positive across the board. The day ended with advancing volume getting the best of declining volume by a factor of 3.6 to 1 on the NYSE and 1.9 to 1 on the Nasdaq.

On Friday, we entered the ProShares UltraShort QQQ ETF (QID) because it had rallied and closed above the 50-day MA for the first time since August, 2010. Further, QID began to show signs of institutional accumulation as volume increased dramatically and the accumulation/distribution histogram began up-trending in late February. Note that on February 25th, the accumulation/distribution histogram hit a new low but the price of QID did not. This divergence often signals the potential for a near term reversal. For our subscribing members, trade specifics can be found in the watchlist segment of the newsletter.

The Semiconductor HOLDRS ETF SMH may provide a shorting opportunity below the two day low of $33.51. The semiconductor sector has exhibited relative weakness to the broad market recently and has in large part led t the weakness in the Nasdaq. We are placing SMH on the watchlist. For our subscribers, trade details are posted in the watchlist segment of the newsletter. For those unable to short SMH, buying the inversely correlated SOXS above the two day high could provide a reasonable alternative trade.

Given the concerns coming out of Japan (Nikkei 225 closed down 6.2%), it appears as if we will gap down this morning. The unfortunate circumstances in Japan could be what precipitates an extended correction in the broad market.

Today’s Watchlist:


Shares = 500
Trigger = 33.44
Stop = 34.43
Target = 30.35
Dividend Date = n/a

Notes = see commentary above

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

    position summary

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  • Per intraday alert, we purchased the UltraShort QQQ (QID).
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      Edited by Deron Wagner,
      MTG Founder and Head Trader