The Wagner Daily


The major indices spent most of yesterday in a narrow range, aborbing the gains of the previous day. The broad market traded marginally negative throughout most of the day, but some mild buying into the close pushed the Nasdaq into slightly positive territory, while the Dow Jones showed relative weakness and lagged behind. The Nasdaq closed 0.2% higher, while the Dow Jones closed 0.2% lower. The S&P 500 Index closed flat. As we mentioned in yesterday’s newsletter, the Dow is quickly approaching major resistance of its monthly downtrend line from the January 2000 high, and perhaps we are beginning to see rotation out of the Dow in anticipation of this test. The 2000 level on the Nasdaq Composite, which formerly acted as resistance, held throughout the day as the new support level, as did the 36.18 level with QQQ. Overall, the broad market acted okay yesterday, but the divergence between the major indices made it feel more like a choppy reversal day.

Volume dropped off slightly in the NYSE yesterday, but increased over the previous day in the Nasdaq. But, in both cases, volume came in well below its 50-day average, which was not surprising given the holiday week. We expect volume to drop off even sharper today, especially in the afternoon, as many traders will probably begin preparing for New Year’s Eve celebration in the afternoon. The stock market is open the full day today, but you probably won’t miss much if you close up shop a few hours early or even take the whole day off.

It appears the major indices will each close the year near their respective highs, which is a nice change of pace for long-term investors who sustained large losses over the prior three years. As short-term traders who trade on both the long and short side of the markets, the actual market direction does not matter much because our monthly results have been consistently profitable regardless of which way the market is trending. The most challenging environment for short-term directional traders is one in which volume is light and the markets trade sideways. But, as long as the volatility continues next year, which there is no reason to assume it won’t, Morpheus Trading Group will look forward to its third year of consistently profitable results, as well as providing the usual market education.

The stock markets are closed all day tomorrow for New Year’s Day holiday, so The Wagner Daily will not be published. However, regular publication will resume on Friday, January 2. Morpheus Trading Group would sincerely like to thank you for all of your support and enthusiasm in 2003! MTG has many exciting new improvements and additions planned in 2004, so stay tuned. The best is yet to come!

Today’s watch list:

There are no new “official” trade setups going into today, but we will aggressively re-assess the market after institutional money returns to the market and shows its intentions. We expect this to happen beginning January 5.

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 (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:

    SMH long (from Dec. 29) –
    bought 41.50, sold 41.83, points = + 0.33, net P/L = + $90

Open Positions:



SMH hit its trailing stop (which was raised via intraday e-mail alert) and resulted in a small gain. We are now all cash.

Edited by
Deron Wagner,
Founder and President