The major indices began with a decent opening gap higher yesterday, but the buying interest promptly faded within the first 30 minutes of trading. The broad market spent the remainder of the day oscillating in a narrow range, with a negative bias for the remainder of the morning, but a minor rally in the late afternoon. The end result of this uneventful trading action was slight losses in each of the indices. The Nasdaq closed down 0.4%, but both the S&P 500 and Dow Jones closed fractionally lower. While it was a bit disappointing for the bulls to see the early buying interest fizzle out so quickly, it is important to point out that volume in the Nasdaq declined versus the previous day. This means yesterday was not another distribution day, as we have become so accustomed to lately. Volume in the NYSE remained basically the same for the third consecutive day.
From a technical basis, yesterday’s dull action did not change the recent analysis we have done on the daily and weekly charts of the major indices over the past several days. It was an “inside day” on the daily charts of each of the major indices, meaning that yesterday’s trading range was completely “inside” of the previous day’s range. A rally on higher volume would have given us a bullish signal going into today, while a break of the previous day’s lows would have increased our bearish stance. But, given that it was an “inside day,” there is nothing new to point out that we have not already thoroughly analyzed within the past two days.
Remember that the Nasdaq is now testing support of its 200-day moving average. Notice how yesterday was an “inside day” on the daily chart of the Nasdaq below:
Obviously, a sharp break below the 200-day MA would be bearish because it would indicate a break of long-term support. But, it is not uncommon for indices such as the Nasdaq to probe below their 200-day MAs for a day or two, then quickly bounce back.
The indices each closed slightly lower yesterday, but with volume declining in the Nasdaq and being flat in the NYSE, it could indicate that the sellers are temporarily drying up. Confirmation of this would occur if the indices rally today, especially if they do so on higher volume. However, until we see the solid confirmation of a reversal, caution remains in order on the long side.
Today’s watch list:
There are no new plays for today, as we want to see confirmation of a higher volume rally before looking to enter new long positions. Conversely, we feel the risk/reward of initiating new short positions at current price levels is not good.
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.
QQQ long (from March 23) –
bought 34.58, stop at 33.94, target of 36.50, unrealized points = (0.55), unrealized P/L = ($220)
We bought QQQ per yesterday’s trade setup and remain long with the same stop.
Founder and President