Commentary:
The major market indicies rallied back from the morning gap-down in anticipation of the FOMC meeting yesterday afternoon, but sold off sharply on the announcement that everyone was expecting in the first place. Since it is usually difficult to trade on Fed day, I only made one trade yesterday (short SPY), but it is working out well so far.
I’m not too excited going into today’s session because both the S&P and Nasdaq are now in “no-man’s land.” Both indexes were unable to break the 3-day high, which would have represented a break of the downtrend on the daily. Instead, the S&P formed a double-top on the daily and is now in the middle of a trading range on the daily, with support of the lower channel of the uptrend on the daily just below. I really don’t have much of an opinion as to the direction of the market today other than to say there could be some follow-through selling on the open, which would give us a good opportunity to cover our SPY short for a nice profit.
Most of the sectors closed in the red, with the exception of Gold (GOX) and Retail (RLX), both of which closed slightly positive. The interesting thing about these sectors is that both these sectors held their morning lows into the close, while the rest of the sectors set new intraday lows into the close.
Today’s watch list:
OIH – Oil Service HOLDR ETF
Sector: Oil Service
Long
Trigger = 53.30
Target = 55.70
Stop = 52.29
Notes = Oil Service was one of the few sectors that did not break the lower channel support of its short-term uptrend with yesterday’s selling. The tracking stock closed on its trendline support and 20 day MA. I will be looking to go long once the strength of the uptrend is confirmed by rallying back above Tuesday morning’s lows and Monday’s closing lows, both just over 53.
MDY – MidCap SPDR ETF
Sector: n/a
Short
Trigger =
77.90
Target = 76.35
Stop = 78.80
Notes = This tracking stock for the MidCap index is about to break support on the daily, which should lead to a test of the low of August 7. Usual rules apply if the market gaps down. . .will likely wait for a break of the 20-minute low for confirmation before shorting.
Deron’s Report Card:
The SPY short triggered in the afternoon, after the FOMC meeting. I am still short with a tightened stop and will be covering into any gap down.
Closed Positions:
- PPH long – (never triggered)
Open Positions:
- SPY short – shorted 89.73, tightened stop to 89.05, open with + 0.76
Glossary and Notes:
Remember that opening gaps that cause stocks
to trigger immediately on the open carry a higher degree of risk because the
gaps (both up and down) often do not hold. Use caution if trading stocks with
large opening gaps.
Trigger = Exact price that stock must trade
through before I will enter the trade. If a long position, I will only enter the
stock if it trades at the trigger price or higher. For a short position, I will
only enter the stock if it trades at the trigger price or lower. It is really
important to only enter the position if the trigger price is hit, otherwise the
trade becomes riskier.
Target = The anticipated price I am
expecting the stock to go to. However, this does not mean that I will
always hold the stock to that price. If conditions warrant, I will sometimes
take profits before that price, in which case I will notify you of the
change.
Stop = The price at which I will have a physical stop
market order set. As a position becomes profitable, this stop price will often
be adjusted to lock in profits. Again, you will always be notified of such
changes in the next daily report or intraday if you subscribe to intraday
updates.
Closed P&L under Deron’s Report Card is based on the actual
price I closed my trade at, not just the theoretical target or stop price listed
for each stock. Open P&L is based on the closing prices of the most recent
trading day.
Unless otherwise noted, average holding time is 2 days to 2
weeks once a position is triggered. Updates on open positions are provided
daily.
Yours in success,
Deron M. Wagner