Commentary:

Stocks closed mixed on Tuesday as trade rose slightly. The morning session showed promise as stocks rallied sharply. For most of the day stocks consolidated at the highs but at the 2:30 reversal period sellers entered the market and drove stocks to session lows into the close. Smaller cap stocks underperformed for the second consecutive day as the small-cap Russell 2000 and the S&P MidCap 400 dropped 1.7% and 1.3% respectively. After being up as much as 1.2% on the session, the Nasdaq closed down by almost 0.9%. The S&P 500 fell 0.2% while the Dow Jones Industrial Average closed fractionally higher.

Market internals were modestly bearish yesterday but when reviewed in context of the sharp intraday reversal a more negative picture appears. Volume climbed by 0.6% on the NYSE and 1.1% on the Nasdaq with most of the uptick in trade coming at the afternoon reversal period. Declining volume outpaced advancing volume by a ratio of 1.7 to 1 on the NYSE and 2.5 to 1 on the Nasdaq. Given the recent churn at the highs and yesterday’s sharp intraday reversal we would classify yesterday as a distribution day for the broad market.

Yesterday the ProShares Ultrashort Basic Materials ETF (SMN) formed a reversal candle as it gapped down, sold off, abruptly reversed and rallied to close near the two day high. A volume assisted move back above yesterday’s high of $21.24 could provide a long entry trigger for SMN. We are placing SMN on the watchlist. Trade details can be found in the watchlist segment of the newsletter.

Over the past two days the iShares Dow Jones US Real Estate ETF (IYR) has formed back to back reversal candles as it struggles to hold support of its 20-day EMA. A move below the two day low of $55.34 could result in further selling pressure for this ETF. We are also placing IYR on the watchlist. Trade details are available to our subscribers in the watchlist section of the newsletter.

We raised our stop in EEV yesterday and the stop was hit. We exited the second half of the trade and booked a solid gain. Our position in EUO remains intact and it appears ready to move higher. Yesterday’s sharp reversal does not bode well for market bulls. If we see a follow through day on Wednesday, another round of heavy selling appears likely.

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Today’s Watchlist:

SMN
Long

Shares = 250
Trigger = 21.32
Stop = 19.38
Target = n/a
Dividend Date = n/a

Notes = See commentary above

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IYR
Short

Shares = 200
Trigger = 55.23
Stop = 57.15
Target = n/a
Dividend Date = n/a

Notes = See commentary above

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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:

• EEV stop triggered on remaining half position. The total dollar gain on the full position is $379.
• 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