today’s watchlist (potential trade entries):

open positions:

Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on two separate $50,000 model portfolios (one for ETFs and one for stocks). Changes to open positions since the previous report are listed in red text below. Be sure to read theWagner Daily subscriber guide for important, automatic rules on trade entries and exits.

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closed positions:

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ETF position notes:

• Per intraday alert, sold ERY to lock in a small gain.

stock position notes:

• No trades were made.

ETF and broad market commentary:

Stocks rebounded sharply on Thursday but trade was light. The S&P MidCap 400 led the move higher, as it posted an impressive 1.8% gain. The small-cap Russell 2000 tacked on 1.5%, while both the DJIA and the S&P 500 closed up by 1.4%. The Nasdaq added 1.3%. Only four of the 103 Sectors that we track closed lower on the day. The day’s big winners were coal, non ferrous metals, platinum and steel.

Despite the solid price action, market internals ended the session mixed. Volume slid over Wednesday’s anemic levels by 4.1% on the Nasdaq and 3.5% on the NYSE. Advancing volume topped declining volume on the NYSE by an impressive 9.6 to 1 and on the Nasdaq by 3.7 to 1. For a second time in as many days, institutional investors were absent from the market

Presently, there are very few setups that meet our trade entry criteria. Further, we still have a sell signal in the market. Two ETFs that could provide shorting opportunities into a bounce are the PowerShares DB Base Metals ETF (DBB), and the iShares Dow Jones US Telecom ETF (IYZ). Both ETFs are possible short candidates on a rally into resistance near their respective 20-day and 50-day moving averages.

We exited our open position in ERY yesterday to post a modest gain. We don’t like staying in leveraged ETFs for extended periods of time, particularly when market conditions appear to be moving against the position. Much of the luster of Thursday’s advance was overshadowed by a second consecutive day of low volume. Until the market is able to post a significant accumulation day, all higher price action should be viewed as suspect.

stock commentary:

The bearish volume pattern is stil very much intact with the market pushing higher on lighter volume the past two sessions. Our scans continue to produce stocks that are in base mode, with most setups needing two to three weeks of consolidation to form valid buying patterns. Our strategy is pretty simple, we either buy a breakout from a valid base or we buy the first one or two pullbacks after a valid breakout. When these setups are nowhere to be found the market is not healthy and simply needs more time to base out to produce quality buy setups. We know that it is difficult to sit in cash when the market bounces higher after a selloff, but when we are operating under a sell signal the market can not be trusted. Patiene is key right now.

VVUS may need a few more weeks before it is ready (along with the market), but this consolidation at the highs is bullish (VVUS is not an official buy setup).

If you are a new subscriber, please e-mail rick@morpheustrading.com with any questions regarding our trading strategy, money management, or how to make the most out of this report.