The Wagner Daily


Like the prior three days, the major indices once again spent the entire session in a narrow, sideways trading range. The S&P 500 and Dow Jones Industrial Average both closed 0.6% lower, while the Nasdaq Composite lost 1.0%. Most of the losses, however, were the result of an opening gap down, as opposed to an intraday downtrend. While the opening gap would have been profitable if we already had open positions from overnight, the subsequent lack of intraday trend made it difficult to profit from entering new positions. As such, we once again remained mostly in cash throughout the day. Volume in the NYSE was a marginal 0.7% higher than the previous day, but volume in the Nasdaq was 3% lower. Although the Nasdaq has closed lower during the past two days, volume has also declined at the same time. This means that, despite the losses, the Nasdaq is still not seeing any signs of heavy institutional distribution.

Going into today, we are likely to see at least a marginal bounce higher in both the S&P 500 and Nasdaq Composite, due to support of their 50-day moving averages. Below are daily charts of both indices that illustrate support of their 50-day moving averages, just below yesterday’s closing prices:

Unfortunately for the bulls, the anticipated bounce off the 50-day moving averages is likely to be short-lived due to a lot of overhead resistance. On the chart of the S&P above, notice the new resistance of the 200-day moving average, which has converged with the 20-MA, at the 1,117 area. Unless we see a big volume increase in the markets, any upward bounce is likely to have a difficult time getting back above that resistance level. On the Nasdaq Composite, the 20-day MA will act as resistance at the 1,879 area, as will the lows of September 22 – 24 (1,880 to 1,885 area). As you can see, the Nasdaq remains well below resistance of its 200-day moving average, although we still feel the Nasdaq is more likely to test its resistance at 1,965 before going much lower.

As a reminder, keep an eye on the Gold and Silver Mining Index ($XAU), which our fund took positions in when the index broke out last week. Since the September 21 breakout above the 200-day moving average, the index has been consolidating in a narrow range, near the highs. This is a bullish pattern and should lead to new highs within the next several days. The daily chart of the $XAU below illustrates this bullish consolidation:

As mentioned last week, there is not currently an ETF that tracks the Gold sector. However, we have created a “synthetic ETF” by entering long positions in a small basket of the gold/silver stocks that have good looking charts. Our favorites in the sector right now: PDG, GG, AU, CDE, PAAS. Other leading stocks in the sector to consider are: NEM, ABX, HMY, and GFI. If not already long, you may consider buy stopping into long positions after the index breaks its high of the consolidation illustrated above.

The market action of the past three days has indicated how indecisive traders and investors are right now. Though the broad market has drifted lower for the past several days, it has done so mostly through opening gaps. The lack of intraday direction tells us that traders are not willing to take an aggressive stance on either side of the markets right now. As long as this continues, we recommend you do the same as the professional traders — stay on the sidelines and wait. The market is soon due for a trending day, and being in cash enables you to be nimble, ready to take a position in whichever direction the trend occurs. Sitting mostly in cash may not be very exciting, but our goal in trading is to make consistent profits, not getting thrills from gambling.

Today’s watch list:

(No new trade setups for today, although we are considering a long entry in SWH (Software HOLDR). Will send intraday e-mail alert to subscribers when/if we enter the position.)

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:



We were flat yesterday and remain in cash going into today.

Edited by Deron Wagner,
MTG Founder and