Short setup in the China Small Cap Index (HAO)


Wednesday was a very difficult day for the market. With the exception of the Dow, the major indices took a pounding and closed near the lows of the session. The Dow Jones Industrial Average managed to close near the middle of its trading range, as it shed a modest 0.1% yesterday. The other four indices finished down by one percent or more. The S&P 500 was the best of the rest, as it fell 1.0%. The Nasdaq, S&P MidCap 400 and the small-cap Russell 2000 plummeted 1.5%, 1.7% and 2.5% respectively. Over 400 stocks finished the session lower by 4% or more.

Market internals ended the day mixed, but the day’s action was markedly negative. Turnover rose by 5% on the Nasdaq, while it fell by 6% on the NYSE. Declining volume overwhelmed advancing volume on both indices. The ratio of down to up volume was 9 to 1 on the NYSE and 6 to 1 on the Nasdaq. Despite the drop in volume on the NYSE, Wednesday would be properly categorized as a distribution day for the market.

The iShares MSCI South Africa Index ETF (EZA) sliced through support on Wednesday on a big spike in volume. A move below yesterday’s low may provide a shorting opportunity in this ETF. Yesterday’s low coincides closely with the 20-week MA. A volume fueled move below this key support level could result in a drop to the 200-day MA.

In Wednesday’s action, The Guggenheim China Small Cap Index (HAO) tested support at the seven day low ($30.60), but managed to hold this key mark. Since November, this ETF has been setting a sequence of lower highs and lower lows. A move below yesterday’s low of $30.53 could provide a short entry trigger for HAO. We will be monitoring HAO closely for a possible short entry.

Given the abrupt move in the market yesterday, we have tightened the stops on all of our positions. Most trade setups that we have been following were nullified by Wednesday’s bearish reversal. Caution is warranted due to Wednesday’s negative market action.

Today’s Watchlist:


Shares = 800
Trigger = 18.76
Stop = 17.94
Target = 20.60
Dividend Date = n/a

Notes = see commentary from Jan. 14th report

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 changes to the stop price in the open positions section.

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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader