Last Friday’s pre-holiday session was marked by divergence, as both the
S&P 500 and Dow Jones closed only 0.3% lower, but the tech-heavy Nasdaq lost
1.5%. A negative report from Intel the previous evening caused the Semiconductor
sector to get slammed with a 5% loss on Friday, but the major indices held up
relatively well. The Friday before Labor Day weekend is typically a slow
session, but not this year. Volume in the Nasdaq increased by 3% over the
previous day, which made Friday the first “distribution day” the Nasdaq has had
since the current rally began on August 16. However, volume declined by 17% in
the NYSE, which means that Friday’s losses were not the result of heavy
institutional selling. The pattern of low overall volume continues, as it has
been 17 days since volume in the NYSE registered above its 50-day average level.
We will most likely begin to see an increase in volume now that the Summer
doldrums are coming to an end.
Despite Friday’s losses, the S&P 500 Index closed the week above new
support of its 200-day moving average, which it rallied above the previous day.
Going into today, we expect the S&P to find support between the 1,110 to
1,112 area, which correlates to support of the prior high from August 27 (1,110)
and the 200-day MA (1,112). As long as the index holds above that range, we
remain moderately bullish on the S&P in the short-term. Resistance will be
found near last week’s highs at 1,120. The daily chart of the S&P below
illustrates these support and resistance levels:
The daily chart of the Dow Jones Industrial Average is similar to the
S&P, except that the Dow actually closed a few points below its 200-day MA.
Regardless, it’s not uncommon for an index to probe a few points below a key
moving average, but immediately snap back above it the following day. Therefore,
we cannot declare a break of the 200-day MA based on Friday’s closing price in
the Dow. If, however, Friday’s lows are broken, there is support just over the
10,200 level, as illustrated by the horizontal line on the chart below:
Finally, take a look at the Nasdaq:
The Nasdaq Composite, which has lagged behind the S&P 500 and Dow during
the rally of the past three weeks, has a slightly different looking chart. The
index was unable to rally above its 50-day moving average last week, and is
still well below its 200-day MA. However, the index closed above support of its
uptrend line from the low of August 13, which should act as support going into
today as well. On the upside, resistance will be met at the 50-day MA, which
converges with last week’s high around the 1,876 – 1,878 area.
Today’s watch list:
There are no
new trade setups for today, but we will send an intraday e-mail alert when/if we
enter any new ETF swing trades today.
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.
- QQQ long (from Sept. 1) –
bought 34.07, sold 34.09, points = + 0.02,
net P/L = + $0
QQQ hit our trailing stop on Friday,
causing us to break even on the trade. We are now flat the ETFs.
Edited by Deron Wagner,
MTG Founder and