The Wagner Daily


Yesterday was a real snoozer of a session, as the broad market opened near the previous day’s close, traded in a tight, sideways range, then closed near the flat line. The S&P 500 Index traded in an extremely boring 4-point range throughout the entire day and closed the day up 1 point (0.1%). Action was just as lethargic in the Nasdaq, which also closed 0.1% higher. The Dow Jones Industrial Average closed flat. Oil Services Index ($OSX) was a clear winner yesterday, but most of the gains were the result of an opening gap up. Another day of declining volume in the broad market was largely the culprit for the lack of inactivity yesterday. Volume in the NYSE declined by 13%, while volume in the Nasdaq was 12% lower than the previous day. In summary, you did not miss a thing in the ETF arena if you happened to take the day off yesterday.

Because of the narrow trading range of the broad market, each of the major indices formed “inside days” on their daily charts yesterday. This means that yesterday’s intraday lows AND highs were contained completely within the previous day’s trading ranges. When you have an “inside day” on the major indices, the technical picture largely remains unchanged going into the next day. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are each sitting above their 20, 50, and 200-day moving averages, which means that odds probably favor the long side of the market. But, at the same time, there is no conviction to the rally days either. This has resulted in range-bound trading conditions that result in broad-based weakness one way and strength the next. The daily chart of the Nasdaq illustrates the choppy price action we have seen lately:

I hate to sound like a broken record, but you just cannot expect much follow-through in either direction as long as volume remains well below average levels. In order to compensate for the lack of follow-through in the market, we recommend reducing your share size in all new trade entries, as this will reduce your overall risk exposure at a time when there is no reason to be aggressive. Also make sure you are using trailing stops to lock in gains when you are able. This is not the time to be aggressive at riding profitable trades because we are not in a trending market.

Today’s watch list:

(There are no new trade setups for today, although we remain short DIA, which we shorted at 104.35 on June 15.)

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:

    DIA short (HALF position, from June 15) –
    shorted 104.35, covered 103.91, points = + 0.44, net P/L = + $42

Open Positions:

    DIA short (from June 15) –
    shorted 104.35, new stop 104.15, target 102.90, unrealized points = + 0.36, unrealized P/L = + $36


Per intraday e-mail alert, we covered and took profits on half the position of DIA yesterday, but remain short the second half of the position with a tighter stop of 104.15.

Edited by Deron Wagner,
MTG Founder and