S&P 500 SPDR (SPY) approaches its 200-day MA (again)


After a sharp morning gap up, U.S. stocks sold off briskly for the first hour of trading. The market consolidated for several hours, then rallied to finish near the highs of the day. However, the consolidation and rally, from 10:30 am ET to the close, lacked volume and conviction. Better than expected employment data appeared to provide the fuel for the rally, as last Friday’s payroll numbers beat expectations for the first time in four months. The Dow Jones Industrial Average and S&P 500 each closed up 1.3% on the day, while the Nasdaq rose by 1.5%. The S&P Midcap 400 closed the session with a 1.4% gain. The small-cap Russell 2000 led the rest of the indices by posting a slightly better 1.7% advance.

As is typically expected ahead of three-day weekends, the markets rallied on less than impressive volume. Nasdaq volume decreased 1.2%, while NYSE volume was 1.5% lighter than the previous day’s level. Advancing volume beat declining volume by 10 to 1 on both the NYSE and Nasdaq. However, the advance was not shared equally across sectors. Utilities, Healthcare and Consumer Staples sectors were laggards, posting modest gains of 0.4%, 0.9% and 0.6% respectively. Overall, it was a bullish move on the day, but the rally began showing short-term signs of exhaustion.

After last week’s three-day rally, the S&P 500 SPDR (SPY) may be setting up for a very near-term short selling opportunity. The ETF faces resistance from its 200-day simple moving average, as well as a downtrend line drawn through the April 26th and August 9th highs. Further, volume has been declining since the onset of the rally. A move into the 200-day simple moving average also fills the gap created on August 11th. Short-term momentum traders might consider a potential short entry between $111 and $111.40, but we will not make it an “official” play because of the brief time horizon for the play:

The WisdomTree India Earnings Fund (EPI) is poised for a potential breakout. Despite weak volume in the broad market on Friday, EPI saw strong volume. This ETF has been consolidating for the past thirty days, and a break above $24.07 would provide a potential entry signal. Above $24.35, EPI would be poised to rally to its all time highs. Take a look:

Though our bearish position in UltraShort Europe ProShares (EPV) is under pressure from last week’s rally, several of our long positions are making nice moves. PowerShares Agriculture (DBA) broke out to close above recent resistance and a fresh high of the year. Our long position in iShares Turkey has also been steadily moving higher since our entry point. Now that the Labor Day holiday has passed, we look forward to more volume coming back into the markets, which may enable the major indices to finally make a decisive move out of their summer trading ranges. A breakout in either direction is better for trend traders than the choppy, indecisive price action that has plagued the market lately.

Today’s Watchlist:

There are no new setups in the pre-market today. If any new trades are entered, we will promptly send an Intraday Trade Alert with details.

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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  • Note the new stop price in EPV, which is 15 cents below last Friday’s opening 20-minute low. This is due to the MTG Opening Gap Rules being applied on the open.
  • 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.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader