S&P May Hold the Key – (GLL) (EWJ)


Stocks gapped higher at the open on Tuesday, but struggled for most of the day, and eventually closed near session lows. All five major indices closed lower on higher trade. For the second day in a row higher beta stocks led the decline. The small-cap Russell 2000 plummeted 2.1%, while the S&P MidCap 400 dropped 1.9%. The Nasdaq finished down 1.3%. The S&P 500 and the Dow Jones Industrial Average fared slightly better as they fell 0.9% and 0.6% respectively.

Market internals ended the session on a bearish note yesterday. Volume surged across the board. Turnover on the Nasdaq and NYSE surged by 13.9% and 23.6% respectively. Declining volume topped advancing volume across the board. The spread ratio ended the session at ratio of -4.7 to 1 on the NYSE and -2.7 to 1 on the Nasdaq. Yesterday was clearly a distribution day, as prices fell while volume increased. Unlike the past two sessions, institutions controlled the day’s action.

Yesterday, EUO hit our target and we exited the trade with a solid profit. Last week we turned a nice profit on GDXJ and we are also slightly in the money on AGA. AGA appears very close to breaking out. Also yesterday, via intraday alert, we entered a long position in the ProShares UltraShort Gold ETF (GLL). Shortly after our entry, GLL broke out to set a new swing high and we are now solidly in the money on the trade. We decided to enter GLL because it was showing relative strength, as it quickly reclaimed its 5 minute high after selling off at the open. We waited for GLL to overcut Monday’s high of $17.83 and then entered the trade on a pullback. Details for this trade are available to our clients in the open position segment of the newsletter.

The iShares MSCI Japan Index ETF (EWJ) sold off sharply after attempting to reclaim support of its 20-day EMA. Further, EWJ reversed on increasing volume. A volume assisted move back below yesterday’s low of $19.15 could provide a shorting opportunity in this ETF.

The DJIA is the only index that is still holding support of its 200-day MA. The S&P 500 undercut, but managed to hold support at its 50-day MA. However, the Nasdaq sliced through, and closed below support of the 50-day MA. Further, the 20-day EMA crossed below the 50-day MA on the Nasdaq. This is generally considered a bearish signal. For the moment, the Nasdaq poses the most concern because it was unable to hold key support. It is important to note that undercuts of major moving averages are not necessarily bad. They serve to sweep stops and shake weak hands out of the market. This type of price action is generally needed for reversals to occur. But again, the fact that the Nasdaq lost support is not a good sign. Consequently, it is now key that the S&P holds support at the current level. If this broad market index loses support of its 50-day MA, we will likely see further broad based institutional distribution.

Today’s Watchlist:

There are no new official setups for today. As always, we will send an intraday alert if any new trades.

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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  • Per intraday alert, sold EUO to lock in gains and bought GLL.
  • 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