The Wagner Daily


The S&P 500 Index and Dow Jones Industrial Average both broke their five-day winning streaks yesterday, as each index dropped 0.6%. Major weakness in the tech-related sectors caused the Nasdaq Composite, which shed 1.7%, to suffer the brunt of yesterday’s broad-based losses. Volume in the NYSE was 5% higher than the previous day, which means yesterday was a bearish “distribution day” for the S&P 500 and Dow Jones. However, volume in the Nasdaq actually declined by 3%. Despite the nearly 2% loss in the Nasdaq, yesterday’s selloff was less severe than the numerous “distribution days” that plagued the index throughout most of July. Nevertheless, breadth in the Nasdaq was extremely negative, as declining volume outpaced advancing volume by a ratio of more than 5 to 1!

Yesterday’s broad-based weakness caused both the S&P 500 and Nasdaq Composite to close at support of their prior downtrend lines, which the indices rallied above during the past week. The daily charts of both indices illustrate yesterday’s closing prices right on this support level:

Because of the trendline support pictured above, we feel the market currently presents us with a low-risk entry point on the long side, especially in the Nasdaq. In the current environment, it certainly is safer to buy a pullback to a key support level rather than buying a breakout to a new high. If you entered new positions in the Nasdaq now, you could quickly close your positions if the index closes below the trendline support picture above. If, however, the Nasdaq holds above this support level, you will have the ideal entry point on the long side. Because the Nasdaq sold off on lighter volume yesterday, we feel your best odds of entering new long positions are within the Nasdaq, and not the NYSE-type sectors. As always, obey your stops and remember to trade what you see, not what you think!

Today’s watch list:

QQQ – Nasdaq 100 Index Tracking Stock

Trigger = 7 cents above the high of first 20 minutes
Target = 35.60 (resistance of prior high from July 21)
Stop = 33.90 (below yesterday’s close)

Notes = As discussed in the commentary above, we are looking to buy this pullback in the Nasdaq. However, we will only buy QQQ when/if it rallies above its high of the first 20 minutes of trading. Otherwise, the reversal back up will not be confirmed.

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:

    SMH long (HALF position, from July 29) –
    bought 31.89, sold 32.65, points = + 0.76, net P/L = + $114

Open Positions:

    HHH short (from Aug. 2) –
    shorted 53.88, new stop 54.70, target 51.25, unrealized points = + 1.01, unrealized P/L = + $201


SMH hit our trailing stop yesterday, but we remain short HHH with a 1 point unrealized gain.

Edited by Deron Wagner,
MTG Founder and