Commentary:

The major indices gapped up modestly to begin Thursday’s session, but were met with strong selling pressure immediately. The selloff continued until 12:30 pm, when the market “caught a bid”. Stocks then rallied “listlessly” into the close. The Nasdaq demonstrated relative strength to the broader market, as it found support at the highs of the previous two trading sessions. On the day, the Nasdaq and S&P 500 posted gains of 0.2% and 0.1% respectively. The small-cap Russell 2000 was the big loser, as it shed 0.5%. The blue-chip Dow Jones Industrial Average slipped 0.1%, while the S&P MidCap 400 finished flat for the session. Advancing Sectors included, Health Care +0.5%, Consumer Discretionary +0.4%, Consumer Staples +0.3%, Telecom +0.3%, Utilities +0.2% and Technology +0.1%. Declining sectors included: Industrials -0.3%, Materials -0.1%, Financials -0.1. The Energy Sector remained unchanged.

Volume eased slightly on both exchanges. Turnover on the Nasdaq and the NYSE was down 0.8% and 0.7% respectively. Advancing volume to declining volume was at virtual par in the session. Overall, Thursday’s trading was reflective of the recent indecision clouding the market. There has been an “apparent” absence of institutional involvement over the last five trading sessions. The market has been mired in a “tug of war”, between the bears and bulls, with a victor yet to be determined.

A new ETF was introduced the market today. Van Eck launched Market Vectors Rare Earth/Strategic Metals ETF (REMX). This is not surprising given the recent headlines directed at the “strategic importance” of rare earth metals. Currently, China controls approximately 97% or rare earth production worldwide.

After a major rally, which began in June 2010, the Rydex CurrencyShares Swiss Franc Trust (FXF), has recently pulled back into its 50-day MA. This is the first “touch of the 50-day MA since late June, 2010. It is also noteworthy, that FXF “filled the gap”, formed on September 22nd. Also, the 50-day MA coincides with a .382% Fibonacci retracement, drawn from the July 27th low to the October 14th high. A rally above the three day high on increasing volume, could provide a buy entry for this ETF.

The iShares MSCI Chile Index Fund (ECH), has been consolidating sideways, into the 20-day MA, for the past 30 days. After testing the 20-day MA three times in the past two weeks, this ETF rallied above a very “tight” eight day range. It is poised to potentially set new highs. An ideal entry for ECH, would be a pullback to $74.50. Notice that ECH had a “false breakout day” on October 15th. It is now breaking out again. This is a good technical signal following a “false breakout”. It provides further confirmation that ECH remains bullish.

Since a false breakout on October 10th, The iShares Dow Jones US Telecom (IYZ), has been consolidating in a tight range along the 20-day MA. After a “gap down” below the 20-day MA on October 19th, IYZ immediately rallied back into the trading range. This is a clear example of a “shake out” day. A break above the 3 day high on higher than average volume, provides a potential long entry point for IYZ.

The majority of setups remain bullish. The longer the market consolidates, the more likely the next move is up. Until the market provides confirmation of a trend reversal, it is prudent to stay with the trend. Markets are not rational or irrational, they just are.

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Today’s Watchlist:

There are no new setups this morning. As always, 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:

• No changes in open positions at this time.
  
• 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