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The Wagner Daily


the exception of the final 45 minutes of trading yesterday, the market was
pretty boring and choppy. Both the Nasdaq and S&P lost support going into
the last hour of trading, but volume never really picked up. In fact,
yesterday’s volume in the Nasdaq was the lightest we have seen in over three
weeks. The NYSE volume was also on the light side. What we find interesting is
that despite the fact that the Nasdaq and Dow both set new lows yesterday, the
volume remained light. This could be interpreted to mean that the selloff was
not the result of an abundance of sellers, but rather a lack of buyers willing
to take positions. This was evident to us by the fact that even though the major
market indices lost support into the close, the selling was very orderly. It’s
interesting that we still have not seen the high-volume capitulation day that
everyone has been looking for. Unfortunately, the market is likely to continue
chopping around and being non-committal until we see a real increase in

Since Bush did not really say anything too surprising in last
evening’s public address, we could see a relief rally today. We believe that
yesterday’s selloff into the close was largely due to the uncertainty of what he
would say regarding Iraq. Furthermore, it looks as if Bush is going to intervene
with the West Coast dock workers situation, which could also aid the markets in
providing some support. However, since there is now a lot of overhead price
resistance that has been created, we don’t foresee a sustainable rally unless
volume picks up.

Overnight Globex futures trading has been interesting
and marked by volatility. Although both the S&P and Nasdaq futures traded
significantly higher overnight, the gap has faded a bit as of late morning. Even
though the S&P is likely to bounce off the lows of July 24 today, we are non
committal on both sides of the market until the market shows a reason not to be.

Today’s watch list:

DIA – DIAMONDS (Dow Jones Industrial Average Tracking

Sector: n/a

Trigger = 73.99 (below yesterday’s
Target = 72.60 (lower channel support of downtrend from October
Stop = 74.60 (just above yesterday’s close)

Notes = Although a bit
oversold and due for a rally, a break below yesterday’s low in the Dow is likely
to spark some panic selling because it will result in new lows not seen since
1998. While we are not convinced the Dow will break yesterday’s lows today, we
want to make sure we are short if it does.

SPY – SPYDERS (S&P 500 Index Tracking Stock)

Trigger = 80.25 (above the 40 MA on 15 minute
Target = 82.00 (resistance of October 3 low)
Stop = 79.39 (support
of yesterday morning’s low)

Notes = If the opening gap holds and is able
to rally above the upper channel resistance of the downtrend line from October
2, we are likely to see a sustained rally of at least a few days.

QQQ – Nasdaq 100 Index Tracking Stock

Trigger = 20.45 (above the 40 MA on 15 minute
Target = 20.95 (resistance of the 200 period MA on the 15 minute
Stop = 20.18 (below the 20 MA on the 15 minute chart)

Notes =
Similar play to SPY long above except that the Nasdaq is more likely to trigger
due to the relative strength it showed yesterday.

Deron’s Report Card:

It was a pretty boring, choppy day until the
final 45 minutes of trading when the S&P and Nasdaq lost support. As such,
neither of our swing trades triggered yesterday. For those who subscribe to
Intraday Updates, we entered two intraday trades and were stopped out.

“Swing” trades (per The Wagner

Closed Positions:

    SPY long – (never triggered)

    PPH short – (never

Open Positions:

    WMH long (from Oct. 2) – bought 30.35, stop at 27.25, target 42.50, open
    with (1.59)

Intraday trades (per Intraday
Updates E-mail Service

    SPY long – bought 80.81, stopped out 80.08, closed with (0.73)

    long – bought 18.83, stopped out 18.48, closed with (0.35)

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

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

SOH = Sit On Hands (Don’t Make Trades)

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.

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

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