today’s watchlist (potential trade entries):

open positions:

Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on two separate $50,000 model portfolios (one for ETFs and one for stocks). Changes to open positions since the previous report are listed in red text below. Be sure to read theWagner Daily subscriber guide for important, automatic rules on trade entries and exits.

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closed positions:

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ETF position notes:

• Per intraday alert, sold UWM, TBT, and IYR on a small bounce after the open.

stock position notes:

• Per intraday alert:
  • Sold PCYC to preserve a small gain.
  • Sold FNT, CRI, and KORS for a small (scratch) loss.

ETF and broad market commentary:

A morning gap down pulled stocks lower for a third consecutive day. All of the major indices ended the session down by at least one percent. Smaller cap issues continued showing relative weakness as the small-cap Russell 2000 and the S&P MidCap 400 fell 1.8% and 1.3% respectively. The S&P 500 and the Nasdaq both slid 1.1%, while the Dow Jones Industrial Average lost 1.0%.

Market internals were mixed on Monday. Volume dropped on the Nasdaq by 13.0% and on the NYSE by 4.0%. However, declining volume outpaced advancing volume on both exchanges. By the close, the ratio of declining volume to advancing volume stood at 9 to 1 on the NYSE and 4.9 to 1 on the Nasdaq. Although Monday’s price action was quite negative, the decline occurred on light volume, suggesting institutions we not participating in the selling.

Yesterday, on a pop in volume, the ProShares UltraShort Basic Materials ETF (SMN) rallied through key resistance and closed in the upper third of its intraday range. If market conditions remain weak, SMN could offer a buying opportunity but only if it pulls back and holds support near the recent breakout. Gap ups make it difficult to enter trades, as the skew the reward to risk ratio.

Since a false breakout on April 2, the EGshares Emerging Markets Consumer ETF (ECON) has pulled back to support near its 50-day MA. ECON could offer a buying opportunity if it forms a reversal candle on an undercut of support near $24.30. Notice that volume has dried up during the recent round of selling. Light volume selling is generally considered a good sign for pullback entry candidates.

Yesterday, in response to the gap down, we sold our open positions in TBT, IYR and UWM. Our remaining open positions include ERY, UGA and EPU. Although we are not yet long term bearish on the market, our market timing model has flashed a sell signal. As a result, we intend on keeping any open positions on a short leash. Further, unless something dramatic occurs, we are also inclined to be very selective with respect to entering new trades. Risk management is our utmost concern under the current market conditions

stock commentary:

Due to the recent distribution in the market our market timing model is on a sell signal. When operating on a sell signal we try to cut back on trading activity (stay in cash) and wait a few days for the dust to settle before getting back in to the market (provided there are still quality setups to tade). If any action is taken it will be with reduced share size (1/3 of our normal size).

While we wait for market conditions to settle down let’s take a look at a few potential buy candidates. These setups are not official and their results will not be tracked in the model portfolio:

If you are a new subscriber, please e-mail rick@morpheustrading.com with any questions regarding our trading strategy, money management, or how to make the most out of this report.