The Wagner Daily


A downgrade of the Semiconductor Index by Merrill Lynch once again triggered a selloff in the tech stocks yesterday morning, but most of the broad market reversed most of its losses in the afternoon. At its worst level of the session, the Nasdaq Composite Index was down more than 1.2%, but it recovered to close only 0.5% lower. Volume increased by 8% in the Nasdaq, but was still below average levels because the previous day was so light. Therefore, it’s also difficult to classify yesterday as a “distribution day,” especially given the bullish reversal in the afternoon. Both the S&P 500 and Dow Jones Industrial Average once again outperformed the Nasdaq and even closed positive by just more than 0.1% on the day.

The prior downtrend line on the S&P 500 Index, which we have been discussing in detail over the past week, provided support yesterday afternoon, but not before a sharp morning selloff that took out stop orders. The daily chart of the S&P 500 below illustrates how the prior downtrend line, which was formerly a resistance level, is now acting as the new support. Remember that intraday moves above or below trendlines is common, but it is the closing prices that matter most. Although the S&P probed below the trendline support in the morning, it closed firmly above it in the afternoon. It is not illustrated in the chart, but the downtrend line (in red) began with the high of March 5. Take a look:

Not surprisingly, the Dow continues to find support at its 200-day moving average, which it has done for the past three days. It is now trying to rally back above short-term resistance of its 50-day MA:

The problem with the broad market is that both the S&P 500 and Dow Jones Industrial Average are sitting at solid support levels and are technically poised to go higher from here in the short-term, but the Nasdaq’s extreme relative weakness is preventing the S&P and Dow from getting any momentum going. When one index is vastly out of sync with the others, it tends to affect all of the major indices because the tug-of-war makes the market choppy and usually prevents the broad market from trending smoothly. Given that the major indices closed near their intraday highs yesterday, we will probably see follow-through of another day to the upside, but don’t count on much more than a feeble bounce if volume does not pick up.

Earnings season is now in full swing, as Intel reports after the close today, and AMD and AAPL both report after tomorrow’s close. So far, the market has not been impressed with most of the earnings reports. Yahoo! is a good example of a company that met analyst estimates, but actually sparked a selloff in the sector and the whole Nasdaq. If the market reacts similarly to other important earnings reports this week, I would not count on a very positive reaction from the markets. Remember it is not whether a company reports “good” or “bad” news. Rather, the ONLY thing that matters is the market’s expectations. This is why, for most people, trying to guess which direction a stock will trade after a company reports earnings is a losing game for most traders. The point is to remember the mantra this week. . .Trade what you see, not what you think!

Today’s watch list:

PPH – Pharmaceutical HOLDR

Trigger = above 76.60 (above yesterday’s high)
Target = 78.20 (resistance of the 200-day MA)
Stop = 75.75 (below yesterday’s low)

Notes = We are still stalking PPH for a potential long entry. It never hit our trigger price, so we have risked absolutely nothing so far and now have a better risk/reward on the entry point if it triggers today (note the adjusted trigger price). It is also at support of the lower end of the trend channel. Since PPH sometimes has a wide spread, remember you can track the price of PPH by following its index instead, which is $IPH.X.

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:



PPH did not hit its trigger price, so we remain flat.

Edited by Deron Wagner,
MTG Founder and