S&P 500 and NASDAQ Composite suffer a distribution day ($SPY) ($QQQ)

market timing model: Buy mode

Current buy signal was generated on the close of June 13

Past signals:

Neutral signal generated on close of June 12

Buy signal generated on the close of April 30

(click here for more details)


today’s watchlist (potential trade entries):

$todays watchlist

Having trouble seeing the open positions graphic above? Click here to view it directly on your web browser instead.

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 a $100,000 model portfolio. Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.

$todays watchlist

Having trouble seeing the open positions graphic above? Click here to view it directly on your web browser instead.

closed positions:

open position summary

Having trouble seeing the closed positions graphic above? Click here to view it directly on your web browser instead.

ETF position notes:

  • No setups triggered

stock position notes:

  • $AWAY buy setup triggered.

ETF, stock, and broad market commentary:

As expected, volatility increased after the Fed released its statement at 2 p.m., the major averages on a rollercoaster ride for an hour or so before breaking down in to the close. The late selloff produced a clear distribution day for the NASDAQ and S&P 500, as both averages closed down more than 1.0% on a pick up in volume.

A negative response to yesterday’s Fed meeting sparked a sharp selloff across the board. The main stock market indexes fell an average of approximately 1.2% and closed at their intraday lows. Unfortunately for the bulls, higher volume accompanied the decline, causing both the S&P 500 and Nasdaq Composite to register a bearish “distribution day” that was indicative of institutional selling. Although a single day of distribution is normally not cause for concern in an uptrend, it’s negative that stocks suffered a higher volume decline just a few days after scoring a bullish “accumulation day.” Although the market did suffer a clear distribution day, leading stocks held up well, with only a few selling off on higher than average volume. How leading stocks respond over the next few days if the market continues to pull back in will be key.

In early May, we sold short spot gold through buying Gold Double Short ($DZZ), an inversely correlated “short ETF.” The trade worked out well, as we sold short gold when it bounced into resistance of its 20-day exponential moving average, which followed a massive break of key support. We subsequently covered about two weeks later for a gain of nearly 10%.

Since closing that trade, gold has been oscillating in a range, near its lows, and is now poised to once again break down below a key level of support. This is shown on the daily chart of SPDR Gold Trust ($GLD) below:

$GLD chart pattern

As you can see, $GLD closed right at crucial horizontal price support of its mid-April and mid-May lows. In the coming days, we will be monitoring $GLD for a potential breakdown below this support level. If a convincing break of support occurs, we will then look to sell short $GLD (or buy $DZZ) on a subsequent bounce into new resistance of that prior support level.

Although some aggressive traders like to sell short the actual break of support, rather than waiting for a bounce, we have learned over the years that such an entry in a short position can be risky because false breakdowns occur rather frequently. Instead, a much lower risk entry point is to wait for the breakdown to occur, then look for a short entry into the bounce (just as we did with our trade in early May). To learn more about our strategy for selling short stocks and ETFs that are breaking down, take a look at this educational article on our blog.

Yesterday, we said we ideally would like to see Guggenheim Solar ETF ($TAN) pull back to near-term support of its 20-day exponential moving average, which would provide us with a lower risk buy entry point than buying a breakout above the downtrend line. Due to the broad-based selloff, $TAN indeed gave us the pullback we were looking for:

$TAN chart pattern

Despite yesterday’s decline in the stock market, the chart pattern of $TAN continues to show great relative strength. As such, we still like $TAN for potential swing trade buy entry. As you will see on today’s watchlist, our new buy trigger is just above yesterday’s high. Because of its relative strength, we expect $TAN to be one of the first ETFs to surge higher when the broad market bounces again. But if $TAN fails to move above yesterday’s high, there is no harm done because we simply will wait to buy.

US Oil Fund ($USO) did not trigger yesterday, but remains on our watchlist as well. As it trades sideways, near the highs of its recent breakout, the 20-day exponential moving average is rising to provide support and increase the odds of a successful trade.

$AWAY triggered its buy stop around 11 a.m. yesterday but failed to follow through and sold off with the market in the afteroon. Like $LLEN, if $AWAY can hold above the two-day low, then the setup still has a chance of working out.

If the market pulls back in over the next few days on light volume, then we will definitely look for low risk pullback entries in leading stocks like $OCN. However, if the market suffers another distribution day, then we may have to play defense and possibly run to cash (if our current longs do not hold up).

$OCN is one of a few stocks we are monitoring for a pullback entry. Over the past few days, $OCN has pulled back in orderly fashion on light volume. We are looking for a pull back to the uptrend line and 20-day EMA (around 43.50 – 44.00).

$OCN pullback

We updated the Relative Strength Combo list this evening. Please note the new features on that list in the RS Combo guide below.

Please leave your comment below!

Your email address will not be published. Required fields are marked *