Commentary:
Yesterday’s market action was essentially a non event. After a minor gap
to the upside, the broad markets churned around within a tight range ahead of
the Federal Open Market Committee annoucement at 2:15 pm. Once the announcement
was issued that there would not be a raise in rates and that the Fed would
continue its “accomodative” stance, we had a slight spike up, followed by a
larger selloff which took the Nasdaq Composite to new lows, and then a late day
rally right back into the range. After a brief look at the charts we’ll get into
how the action differed among the three indices.
The first thing that you should notice about the three charts is the
difference in the intraday pattern. Its clearly visible that the Nasdaq closed
much closer to the lows than the other two indices. Furthermore, notice that the
S&P 500 and Dow did NOT break down to new swing lows at anytime during the
session, while the Nasdaq lost Monday’s lows and made an intraday low of 1927.69
which was almost 12 points below the swing lows of Monday. If all other factors
were equal, I would say that the breaking down of the Nasdaq Composite is not
that major of a technical event. The Nasdaq has been showing relative weakness
to the S&P and Dow for quite some time now. What IS of note is the pattern
of overall volume which continues to point to lower prices ahead. Volume in the
NYSE was lagging all day when compared to the overall volume on Monday. In fact
by the end of the day, the NYSE overall volume clocked in 7 percent less than
Monday’s tally. On the Nasdaq however, by the end of the day, overall volume had
increased by 15% over Monday. So, this tells us that the pattern of
markets rising on less volume and selling off on larger volume continues. The
Dow and S&P showed relative strength to the Nasdaq all day, but did so on
decreasing volume. The Nasdaq closed at the lower end of its intraday
range AND made new swing lows on the daily charts, all while volume
increased.
The simple fact that the major averages are in tight
range can be interpreted as a technical event in itself and is a rather bearish
signal. This is because the markets are correcting by time rather than by
price. The steep selloff of last week should provide almost no resistance to
prices when they try to retrace. To this point, however, no retracment into the
range has materialized. Rather, the broad indices are “digesting” the selloff by
moving sideways. Although this is clearly bearish in the larger picture as far
as further market direction, it unfortunately leaves us with limited trading
opportunities as the volatility has contracted somewhat and the markets remain
rangebound. We would be favoring sector ETF’s over the broad market ETF’s such
as QQQ, SPY or DIA at this time. Often when the broad markets are rangebound,
there are sectors that are relatively strong or weak to the market and may
provide better opportunities for trading.
Today’s watch list:
PPH – Pharmaceutical HLDR
Long
Trigger = above 77.94
(over 200 ma daily)
Target = 80.50 (retracement to 20 ma on daily overhead)
Stop = 76.50 (below swing lows)
Notes = PPH is quite overextended
from its 20 period moving average on the dailies and was relatively strong
yesterday, closing above its open when many sectors did not.
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:
- (none)
Open Positions:
- (none)
Edited by Deron Wagner,
MTG Founder and
President