Short the Bounce: (GDXJ) (KRE)


Stocks staged an impressive rally on Tuesday on higher trade. The major indices all finished higher on the day. The small-cap Russell 2000 led the move as it posted a strong 4.9% gain. The Nasdaq and the S&P MidCap 400 also posted impressive gains as they ended the session higher by 4.3% and 4.1% respectively. The S&P 500 surged 3.4% while the Dow Jones Industrial Average improved by 3.0%.

Market internals were decidedly bullish yesterday. Volume increased by 9.6% on the Nasdaq and 1.7% on the Big Board. Advancing volume eclipsed declining volume on both exchanges. On the Nasdaq the advancing volume/declining volume ratio ended the session at 6 to 1 and on the NYSE at 7 to1. Yesterday’s market internals clearly point to institutional buying. Consequently we would classify yesterday as an accumulation day for the broad market.

The SPDR KDW Regional Bank ETF (KRE) has been one of the weakest ETFs in the market over the past year. Further, KRE has been down-trending since December of last year. Given the recent weakness KRE has exhibited, it should present a shorting opportunity into a bounce. A rally into resistance near $21.90 could offer a short entry trigger for KRE. We will be monitoring KRE closely for a potential entry into resistance.

On August 22nd the Market Vectors Junior Gold Miner ETF (GDXJ) attempted to break out above a seven day consolidation zone. However, yesterday GDXJ reversed course as it gapped down and tested support of its 20-day EMA and 50-day MA. A move back below yesterday’s low of $35.33 could provide a shorting opportunity in this ETF.

Given the sharp reversal in the market yesterday, it is quite possible that we will cancel the EWM watchlist setup. If the market sees a follow through day tomorrow we will likely take this setup off the table. It appears that our analysis of the S&P 500 in yesterday’s newsletter was accurate. The $SPX.X not only held support of the 200-week moving average but also rallied sharply and is now likely to test resistance at the 20-week and/or 50-week moving averages.

Today’s Watchlist:


Shares = 400
Trigger = 14.17
Stop = 15.08
Target = New swing low
Dividend Date = n/a

Notes = See commentary from 8/19 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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  • No trades were made.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader