The Wagner Daily


The major indices spent yesterday morning in yet another downtrend, but the broad market found support after the first two hours, then recovered mildly into the close. The Nasdaq Composite Index closed 0.5% lower, but the index was down more than 1% at its intraday low. The S&P 500 Index only lost 0.2%, while the Dow Jones Industrial Average closed flat. Volume was about 2% lighter in the Nasdaq, but 5% higher in the NYSE. Like last Friday, the Nasdaq closed below the previous day’s intraday low. However, both the S&P 500 and Dow Jones Industrials managed to close above the intraday lows of the prior two days. This could mean that the broad market may be trying to put in a short-term bottom, but we still have no confirmation, either by volume or price.

From a technical picture, not much has changed since yesterday’s detailed analysis of the major indices. The Nasdaq is still trading below support of both its 200-week moving average and its prior low from May. Both of these prior support levels will now act as the new resistance on any rally attempt. Therefore, expect to find resistance on the Nasdaq at the 1,860 – 1,865 range, about 20 points above yesterday’s close.

The S&P 500 Index is still holding above support of its prior low from May, and also is holding at its 200-week MA (so far). Expect the 1,100 to 1,105 area to provide solid price resistance on any rally attempt, due to overhead supply caused by the 200-day moving average. The chart pattern for the Dow Jones is similar to the S&P, but the key with the Dow is that it has now broken below the “psychologically important” 10,000 level. Although that number does not represent any specific technical resistance, large round numbers always act as support/resistance levels because many amateurs place stop orders at such key levels. People expect large round numbers to act as support or resistance, so it becomes a self-fulfilling prophecy. The Dow tried to rally back over the 10k level yesterday, and traded up to 10,003, but did not hold above it for more than a few minutes.

Since yesterday’s action was basically a non-event, we’ll keep today’s newsletter more succinct than usual. Going into today, we maintain the same approach we have had for the past week. Overall, we realize the market is “oversold,” but we also know that a market can remain that way for much longer than you would ever expect. So, we are not interested in blindly buying the market without any volume or price confirmation of a possible bottom. Conversely, we feel the risk/reward ratio of aggressively entering new short positions here is not a good one. So, we are content to sit on our ETF gains for the month and remain mostly in cash until we see the next low-risk opportunity.

Today’s watch list:

There are no new plays for today, although we remain short DIA from Friday’s entry.

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:

    DIA short (from July 23) –
    shorted 99.97, new stop 100.35, target 98.90, unrealized points = + 0.19, unrealized P/L = + $38


Per last Friday’s Wagner Daily, we are short DIA. Note the new stop above, which is just above yesterday’s high.

Edited by Deron Wagner,
MTG Founder and