For those of you who did not have the pleasure of being able to trade the shortened day of December 24, you did not miss much! As expected, volume was extremely light (even taking into account an early closing time) and trading was very uneventful. The S&P futures traded in a 5-point range the entire day, which translates into a 50-cent trading range for SPY. The Naz futures traded in a 13-point range, which is very narrow for the Nasdaq as well. Because the trading range was so thin, there were not any individual sectors or indices that presented profitable trading opportunities.
Rather than seeing a pre-holiday rally into the close, the market sold off with the most momentum that was seen the entire day (which still is not saying much). We found this interesting because the market historically rallies on December 24. The S&P futures closed at the low of the previous day, while the Nasdaq futures broke support and closed below the December 23 low. Although the Nasdaq started the day relatively strong, it was among the weakest of the indices into the close. All the major indices are back down below their 50-day moving averages again, so that level continues to be a source of resistance.
The reality is that all of the commentary above is just to give you a recap of what happened during the last trading session, but it really does not tell us anything about what to expect going into today because the volume was so light and the trading range was so narrow. Based on the weak close, I would expect the bias to be slightly negative going into the open, but that could quickly change if the market sees any volume. It’s kind of amusing that the 3-point pre-market gap we are seeing in the S&P futures at the time of this writing is enough to cause the S&P to open near the high of Tuesday. That’s how narrow the range was!
Unfortunately, the week between Christmas and New Year’s Day is usually very slow because many traders and investors are on vacation. Therefore, I don’t expect today’s action to be much better than Tuesday’s. If there does happen to be a trend, be aware that the lighter trading volume is, the quicker and easier trends can reverse. As such, we recommend you reduce your position size and continue to take any profits quicker than usual until we see a return of trading volume, probably after the new year begins. I told Santa that all I wanted was some volume and follow-through in the markets, but maybe he delivered that to the wrong house!
Today’s watch list:
SPYDERS (S&P 500 Index Tracking Stock)
Trigger = 89.20 (below the 2-day low)
Target = 87.50 (just above the low of Nov. 13)
Stop = 89.90 (above the high of Dec. 24)
Notes = If SPY breaks the 2-day low on DECENT VOLUME, it could see a pretty sharp selloff because it would probably spark panic that the market is going to lose support of its 2-week trading range. There is minor support at 88.60 from the low of Dec. 19, but we don’t expect that to provide much support if the low of the week is broken. The main key would be whether or not there is enough selling volume to cause any follow-through.
Daily Reality Report:
Because of the increased number of intraday
trades in our new ETF Real-Time Room, we are in the process of modifying the way
we report daily results in order to minimize confusion to subscribers of The
Wagner Daily. We will continue to report and update you on open positions
each morning; you will always know where we stand with any open positions that
were discussed in the newsletter. In addition, all trade statistics will
continue to be compiled as they were before. However, we will be displaying the
summary of all intraday trades (discussed in the ETF Room) only once per week
(in The Wagner Weekly) instead of daily. This is a more efficient and
less confusing way of reporting our trades, especially on days when we enter the
same position two or three times intraday.
Click here to read
the details on how we calculate our Reality Report statistics.
Trades only from The Wagner Daily (ETF
Intraday Real-Time Room trades not reported):
We closed our SMH and QQQ swing trades prior to hitting their stops on Tuesday when the market began weakening in the late morning. We did not want to be too aggressively long over the holiday considering how light volume has been. We are, however, still long BBH.
QQQ long (from Dec. 23) –
Bought 25.49, sold 25.61, points = + 0.12, net P/L = + $36
SMH long (from Dec. 20) –
Bought 23.70, sold 23.58, points = (0.12), net P/L = ($45)
BBH long (from Dec. 23) –
Bought 90.45, stop at 87.75, open points = (0.55), open P/L = ($56)
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)
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 1 to 3 days once a position is
triggered. Updates on open positions are provided daily.
Yours in success,
Deron M. Wagner