Commentary:

Stocks closed higher but well off session highs as the market reversed late in the session on strong trade. All five major indices closed in the green with small-cap issues showing the most strength on Wednesday. By the closing bell the small-cap Russell 2000 tacked on 1.7%. The S&P 500, Dow Jones Industrial Average and Nasdaq improved by 1.0%, 0.9% and 0.8% respectively. The S&P MidCap 400 gained 0.6%.

For the second day in a row market internals and price action were positive but strangely enough, not bullish. Volume spiked by 18.5% on both exchanges but picked up significantly during the late day sell off and cast a bearish tone over the market. Advancing volume outpaced declining volume by 5.0 to 1 on the NYSE and 2.6 to 1 on the Nasdaq. Despite the positive price action we would not classify Wednesday as an accumulation day as institutions appeared to be aggressively selling into the close.

The ProShares UltraShort Real Estate ETF (SRS) formed a massive reversal candle yesterday on an uptick in volume. A move back above yesterday’s high of $16.64 could provide a long entry trigger for this ETF. We are placing SRS on the watchlist. Trade details are provided for our clients in the watchlist segment of the newsletter.

Yesterday, the iShares MSCI Hong Kong Index Fund (EWH) formed a reversal candle as it found resistance at its downtrend line and 20-day EMA. A moved back below yesterday’s low of $15.82 could present a shorting opportunity in this ETF. We will be monitoring EWH carefully for a possible short entry.

Yesterday’s late session reversal was quite bearish and will likely result in further selling pressure for the next few days. However, now that the major indices have rallied through important resistance levels, we are more inclined to take profits/cut losses on the short side a bit more quickly.

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Today’s Watchlist:

SRS
Long

Shares = 500
Trigger = 16.72
Stop = 15.41
Target = n/a
Dividend Date = n/a

Notes = See commentary above

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DTO
Long

Shares = 150
Trigger = 63.74
Stop = 59.21
Target = n/a
Dividend Date = n/a

Notes = See commentary from October 12

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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 trades were made. The DTO target price has been changed to n/a. We are expecting an explosive move over a short period of time, but we do not have an exact exit price.
• 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