today’s watchlist (potential trade entries):
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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ETF position notes:
- No trades were made.
stock position notes:
- Per intraday alert, took a shot at KORS with an early entry point as the price action pulled back to the 50-day MA. There wasn’t much follow through from the entry, so we sold the position late in the afternoon for a small loss.
ETF and broad market commentary:
Stocks pared some of Tuesday’s big losses but trade was light. The small-cap Russell 2000 led the advance as it posted a 1.6% gain. The S&P MidCap 400 added 1.2%, while both the DJIA and the S&P 500 posted 0.7% gains. The tech-rich Nasdaq climbed by 0.8%. Platinum, non ferrous metals and gold miners all struggled yesterday, while aluminum, homebuilders and telecommunications all posted strong gains.
Wednesday ended with market internals mixed. Volume plunged by 21.7% on the Nasdaq and 19.4% on the NYSE. However, advancing volume topped declining volume by 3.8 to 1 on the NYSE and 3.6 to 1 on the Nasdaq. Given the light volume, it is safe to conclude that institutional players were not active in the market on Wednesday.
The Vanguard MSCI Europe ETF (VGK) has been one of the weaker ETFs during the rally off of last summer’s lows. During the rally, VGK struggled just to reclaim its 200-day MA. During the recent pullback, VGK collapsed below all of its major moving averages, including the declining 200-day MA. A rally into the declining 20-day EMA and 200-day MA could present a shorting opportunity in this ETF.
The Global X FTSE Colombia 20 ETF (GXG) has shown excellent relative strength during the recent market decline. On April 10th, GXG formed a bullish reversal candle, as it under cut the 50-day MA but rallied on strong volume to close near session highs. GXG has now been forming a strong base for almost a month. It generally takes six to eight weeks to form the proper base from which to launch a sustainable rally. Although GXG could provide a long entry above the six day high of $21.50, it is much more likely that this breakout will fail, particularly given the current weak conditions in the broad market. If we were to take a position in GXG above $21.50, we would reduce our position size.
Following an opening gap down, our sole open ETF position, ERY, rallied on solid volume to close near the two day high. We will likely look to exit this position if it does not respond favorably tomorrow. Yesterday’s market rally was far from impressive, as it lacked the strong volume needed to begin repairing the damage done over the past week. We will continue to be selective in our selection of new positions and look to take profits and cut losses promptly.
Now that our market timing model is at a sell signal what exactly are we looking for to trigger a buy signal?
- Major averages need to eventually establish a swing low that holds up for at least a week.
- The volume pattern must become bullish (higher volume up days w/ lighter volume down days)
- Stocks are forming bullish setups from proper basing patterns.
- If/when the volume pattern turns bullish and stocks begin breaking out from valid bases, then our market timing model should shift to a buy. Depending on the type of price and volume action we see from stocks will dictate just how aggressive we are with our exposure and position sizing.
Our short-term plan is to remain mostly in cash and wait for market conditions to settle down. We have been busy the past few weeks but now is the time to lay low and remain patient.
If you are a new subscriber, please e-mail [email protected] with any questions regarding our trading strategy, money management, or how to make the most out of this report.