Commentary:

Stocks took a beating on Friday but on lighter pre-holiday trade. All five indices closed in the red as stocks struggled from the opening bell. Both the small-cap Russell 2000 and the S&P MidCap 400 plunged a whopping 3.6%. The Nasdaq slid 2.6% while the S&P 500 fared fractionally better as it posted a 2.5% loss. The Dow Jones Industrial average fell by 2.2%.

In a follow up to Thursday’s action, market internals ended mixed. Volume dropped by 9.7% on the Nasdaq and 6.3% on the NYSE. However the ratio of declining volume to advancing volume provided a bearish signal as it ended the day at 21.8 to 1 on the Big Board and 13.1 to 1 on the Nasdaq. Although the market was spared a distribution day as a result of the mixed internals, the bearish price action has placed an already weak market under even more pressure.

In Friday’s newsletter we discussed the iShares MSCI Mexico Investable Market Index ETF (EWW) and stated that it was a possible short setup below the September 1st low. On Friday EWW gapped below this low and found support at the 20-day EMA. A volume assisted move below the 20-day EMA could provide a shorting opportunity in this ETF.

On Friday the iShares MSCI South Korea Index ETF (EWY) lost support of its 20-day EMA but found support at the gap formed on August 29th. A move below Friday’s low of $54.47 should result in further downside for this ETF.

As of this writing stocks in Europe have gotten blasted as markets in Asia are also getting hit hard. For the moment it appears as if the US markets will open considerably lower. Consequently most if not all potential setups will be nullified. If the market does gap down at the open we will likely be looking to cover our open positions into this move.

Friday’s market action gave all the signs of a distribution day despite the lighter volume. However, the lower trade could be expected coming into summer’s last hoorah. It was most certainly a follow through day for the broad market. Nonetheless, lighter volume across the board for two consecutive days suggests that buyers could step in at any time. For the current selloff to gain more credibility, we would want to see a follow through day on increasing volume. Be prepared for major volatility this week.

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Today’s Watchlist:

There are no new official setups today. As always, we will send an Intraday Alert if any new trades are made.

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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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Notes:

• Per intraday alert, sold RWM to lock in a quick gain. Purchased ERY on a slight pullback after the morning gap up. The EWW setup has been canceled but we are still monitoring the action for an entry point.
• 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.
• For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.

Edited by Deron Wagner,
MTG Founder and
Head Trader