The Wagner Daily


The broad market turned in a mixed performance yesterday, as the Nasdaq Composite closed flat, but the S&P 500 and Dow Jones Industrials lost 0.2% and 0.4% respectively. After consolidating near the previous day’s highs throughout the morning session, the major indices briefly rallied to new intraday highs, but a modest wave of selling in the late afternoon caused the breakouts to fail. This caused the S&P, Nasdaq, and Dow to each close near their intraday lows, although the losses in the S&P and Dow were minor.

Volume in the NYSE was 14% lower than the previous day and was also the lightest volume day of the year! Volume in the Nasdaaq, which came in 9% lighter, was also well below its average level. The fact that the S&P and Dow closed lower on the day, but also on much lighter volume, could be interpreted as a bullish signal because it indicates institutions were not heavily selling stocks. However, it is important to bear in mind that the gains of the past two weeks have also been occurring on lighter than average volume. As we have said before, this is probably attributed to many large institutional traders taking their summer vacations. After Labor Day holiday in September, we will have a much better feeling for where the market is headed in the intermediate term.

In yesterday’s Wagner Daily newsletter, we analyzed last week’s breakout in the Gold and Silver Mining Index ($XAU) and suggested you look for a pullback to enter new long positions. Fortunately, that is exactly what we got yesterday, as the $XAU index retraced down to support of its prior breakout point. Remember that prior resistance becomes the new support level once the resistance is broken. The weekly chart below illustrates how the index closed yesterday right at support of its prior downtrend line:

We anticipate the breakout above the weekly downtrend line will remain intact and, as such, are viewing yesterday’s pullback in the Gold/Silver Mining index as a low-risk point of entry for new positions on the long side. Review yesterday’s newsletter for a list of individual gold and silver stocks to consider.

Because yesterday’s losses were so minor and occurred on very light volume, the rally that began on August 13 remains fully intact as we enter today. Nevertheless, we recommend tightening your stops on any long positions you have been holding because the broad market’s action into yesterday’s close was bearish. As for entering new short positions, we feel it is probably a bit too early to do so because the market has not yet shown us any bearish price to volume action. Most of the up days during the past two weeks have occurred on heavier volume, while most of the down days have been on lighter volume. Until we begin to see a “distribution day” or two, we feel the odds favor the long side of the market.

Today’s watch list:

There are no new trade setups for today, but we remain long IWM and SMH, both with solid unrealized gains.

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 Aug. 16) –
    bought 29.10, new stop = 6 cents below the 20-minute low, target 31.30, unrealized points = + 1.49, unrealized P/L = + $447

    IWM long (from Aug. 20) –
    bought 107.66, new stop = 12 cents below the 20-minute low, target 110.20, unrealized points = + 0.96, unrealized P/L = + $96


We have changed the stops on both SMH and IWM so that we will close the positions if they set new lows after their first 20 minutes of trading today. If they don’t, however, we will remain long throughout today.

Edited by Deron Wagner,
MTG Founder and