Commentary:

Stocks rallied sharply yesterday but on lighter volume. After nine days of continuous selling the major indices finally saw a day of strong gains. High beta stocks led the advance as the small-cap Russell 2000, S&P MidCap 400 and the Nasdaq tacked on gains of 2.3%, 2.0% and 1.5% respectively. The broad market S&P 500 ended the session higher by almost 1.3%. The Dow Jones Industrial Average was the day’s laggard as it closed out the day with a 1.0% advance. Despite the light volume, Tuesday’s rally had broad based support as most industry gropus participated in the advance.

Market internals were solid but mixed. The day ended with volume down across the board. Trade fell by almost 8.0% on the Nasdaq but managed to finish fractionally below par on the NYSE. Still, volume was light enough on the big board to keep us from classifying Tuesday as an accumulation day on the NYSE. Advancing volume was impressive on Tuesday as it outperformed declining volume by a factor of 7.5 to 1 on the NYSE and 6.2 to 1 on the Nasdaq. The market recovered nicely on Tuesday but the move lacked volume which suggests an absence of institutional participation.

TUR continued to demonstrate relative weakness yesterday as it sold off as the broad market traded decidedly higher. Since we are in the money on this trade by a solid amount, we are lowering our stop to near break-even to avoid taking a loss should the market continue to exhibit strength. Trade details our available for our subscribing members in the open positions section of the newsletter.

The iShares S&P Latin America 40 Index (ILF) has been testing a key support level near $49.60 for the past three months. ILF has bounced off of this level three times since March. The next test of this mark could result in an abrupt drop for this ETF. A rally back into resistance near the 20-day EMA and the 200-day MA could provide a short entry trigger for ILF. We will be monitoring this setup closely for as a possible short entry.

During the recent nine day carnage in the broad market, the iShares Nasdaq Biotechnology ETF (IBB) exhibited excellent relative strength as it barely undercut its 50-day MA while the broad market was testing the 200-day moving average. A move back above the two day high at $104.35 may provide a buy entry trigger for a one or two day rally in IBB.

Although the move in the market was impressive the lack of volume makes it suspect. Without the confirmation of a follow through day and/or several sustained days of rallying, we are warranted to consider Tuesday’s price action as nothing more than a relief rally.

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Today’s Watchlist:

There are no new official setups this morning. 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:

• Lowered stop in TUR to just above break-even.
• 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