Commentary:
The major indices began yesterday with a large opening gap above the recent consolidation levels we have been discussing. However, weak market internals , including weakness in the SOX (Semiconductor Index), indicated that the broad market was going to have trouble going much higher. As such, the major indices lost their momentum, consolidated near the lows of the gap for several hours, then finally reversed and sold off in the late afternoon. The gap up above the 20-day moving average on SPY and the S&P was bullish, but the subsequent reversal and close near the previous day’s lows was quite bearish. In fact, if the broad market would have closed slightly lower, it would have formed bearish engulfing candlesticks, meaning that the range of the day would have completely “engulfed” the range of the previous day.
There is not a whole lot more to say than what I have been discussing this week. Basically, the major indices have been stuck in a trading range for the past several weeks. Trading this consolidation requires being nimble with intraday trades and looking for individual sectors with relative strength or weakness instead of trading the broad market. The Dow, S&P, and Nasdaq all closed below their 20-day moving averages yesterday, creating overhead resistance. But the 50-day moving averages remain underneath as support. If you want a simple, but effective plan for today, simply watch for a break below the 50-day moving averages and short the breakdown. Otherwise, the market is likely to continue chopping around. We will take a detailed look at the technical picture on Monday, but there is not much new to report today.
Today’s watch list:
There are no new plays for today.
Daily Reality Report:
Below is Morpheus Trading Group’s daily
performance report of closed trades and an update on all open positions from
The Wagner Daily (ETF Intraday Real-Time Room trades are reported
separately in The Wagner Weekly). Net P/L figures are based on the
quantity of shares represented in the MTG Position Sizing
Model.
Closed Positions:
- PPH long (from July 23) –
bought 77.87, sold 78.80 (avg.), points = + 0.93, net P/L = + $90
SPY long (3/4 position from July 24) –
bought 100.03, sold 99.91,
points = (0.12), net P/L = ($19)
Open Positions:
-
EWJ long (full position from July 15 – 17) –
bought 7.81 (avg.), stop at 7.35, target of 8.80,
unrealized points = (0.17), unrealized P/L = ($148)
Notes:
Per several intraday e-mail alerts, we took profits on PPH prior to hitting its target due to market weakness. We also used a very tight stop on SPY after we bought it and only lost 12 cents (although we netted a profit on SPY long from overnight in the ETF Real-Time Room). Therefore, our only open position is now EWJ long.
Click here for
a detailed explanation of how daily trade performance is calculated.
Click here for a detailed
cumulative report of MTG’s trading performance (updated weekly)
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.
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.
Unless
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