The Wagner Daily


Yesterday’s action in the broad market was a real snoozer, which was actually a refreshing change from the extreme volatility we have seen over the past two weeks. Each of the major indices traded in an extremely narrow, crabwise range before closing the day flat. The S&P 500 Index and Dow Jones Industrial Average both closed exactly unchanged, while the Nasdaq Composite closed 0.1% lower. Volume in the NYSE was 22% lighter than the previous day, and 16% lighter in the Nasdaq. Advancing volume outpaced declining volume by a ratio of 7 to 5 in the NYSE, but breadth was negative by the same ratio in the Nasdaq. Volatility and volume was nearly non-existent in every major market sector yesterday, so we heeded our recent advice and spent the entire day on the sidelines. If there ever was a case for sitting on your hands and doing nothing, yesterday was it!

We’re always emphasizing the importance of the 200-day moving average with regard to how it nearly always acts as key support or resistance for an index, but the same can be said of the 200-period moving average on ANY time frame. Yesterday’s relationship between the 200-period moving average on the 15-minute chart and the S&P 500 Index was a clear example of the power of the 200-MA. Although the S&P attempted to rally above its 200-MA on the 15 minute chart numerous times throughout the day, it was unable to do so. The chart below illustrates how the 200-MA/15 min. perfectly acted as resistance in the S&P yesterday:

If you were swing trading SPY (S&P 500 Index) on the short side yesterday, you could have simply placed your protective stop just above the 200-MA because a confirmed break above that level would have likely generated a moderate bounce. So, make sure you are using the 200-period moving average on each time frame of every chart you view.

Because volatility was low and each of the indices closed flat yesterday, the technical picture has not changed going into today. The S&P 500 remains just above support of its 200-day moving average, but any rally attempts will have to contend with resistance from the overhead supply of Wednesday afternoon’s selloff. Both the Dow Jones and Nasdaq Composite remain below their 200-day MAs, but are above their prior “swing lows” from earlier in the week. Today is monthly options expiration day, so be prepared for more volatility, especially in the afternoon. It’s probably a wise idea to conclude your trading operations by mid-day in order to avoid the additional volatility that usually plagues the market on options expiration afternoons. After we see how today plays out, we’ll take a look at the longer-term weekly charts going into next week in order to get an idea of where the broad market may be headed after the volatility settles down.

Today’s watch list:

Due to options expiration day, there are no new plays for today. We do, however, remain long the SMH position. Again, watch the gold and silver miners such as NEM, ABX, GG, PAAS, etc. The sector really looks poised to run. There is no ETF, but you can create your own by trading a basket of the leading miners.

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:


Open Positions:

    SMH long (from May 19) –
    bought 37.39, stop 36.20, target 39.40, unrealized points = (0.80), unrealized P/L = ($240)


Using the same stop on the SMH position.

Edited by Deron Wagner,
MTG Founder and