Short setup in small-cap Russell 2000 ETF (IWM)


Stocks sold off sharply on Friday as volume declined. Friday’s action left equities mixed for the week. All five major indices closed down on the session as the higher beta exchanges led the decline. The small-cap Russell 2000, Nasdaq and S&P MidCap 400 plummeted by 1.7%, 1.2% and 1.1% respectively. Both the Dow Jones Industrial Average and the S&P 500 fared slightly better as both dropped 0.8% for the session. The major indices are once again at a major inflection point.

Light trade on Friday left market internals mixed. Despite broad price negativity, turnover was light across the board. Volume on the Nasdaq fell by 13.4% and on the Big Board by 6.4%. However, declining volume significantly outpaced advancing volume on both exchanges. The ratio of declining to advancing volume ended the session at 4.4 to 1 on the NYSE and 6.2 to 1 on the Nasdaq. This was one of the worst readings for this indicator in several months. Nonetheless, we would not classify Friday as a distribution day for the broad market due to the lack of volume behind the move.

On Friday we sent an intra-day alert that we were entering a short position in the iShares MSCI Japan Index ETF (EWJ). Shortly after our entry, EWJ fell abruptly and eventually closed near the low of the session. For our subscribing members, trade details are available in the open positions section of the newsletter.

As the charts below indicate, the major indices are all trading at key support levels. If we lose these levels it is logical to expect at least a day or two of follow through to the downside. However, we are sticking by our plan to take profits quickly as the broad market still remains in a long term uptrend and follow through has been minimal on either side of the market recently.

Due to the relative weakness being exhibited by the iShares Russell 2000 Index ETF (IWM) we are placing it on the watchlist as a possible short candidate. Should the market turn lower over the next several days, IWM will likely drop the hardest due to its recent lack of strength compared to the broad market. Further, this ETF is trading below its trendline and a move below the two day low of $82.98 would result in a loss of support of the 50-day MA.

It is noteworthy to mention that the NYSE is showing relative weakness when compared to the five exchanges that we track. Further, for the most part, market leaders either got pounded or closed near session lows on Friday. Of import, both BIDU and AAPL lost key support levels on the session as trade increased in both stocks. Fading leadership generally does not bode well for the broad market.

Today’s Watchlist:


Shares = 200
Trigger = 82.92
Stop = 85.21
Target = 78.80
Dividend Date = n/a

Notes = See commentary above


Shares = 400
Trigger = 25.89
Stop = 24.91
Target = New highs
Dividend Date = n/a

Notes = See commentary from Arpil 13th 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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  • Per intraday alert, we sold short EWJ. FXZ did not officially trigger on Friday, as it never traded through our entry price after the first five mintues of trading.

  • 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