Commentary:

The broad market oscillated in a narrow range throughout yesterday, as traders showed indecision on the last day of the month and end of the quarter. The Nasdaq drifted back and forth between positive and negative territory throughout the day before eventually managing a 0.2% closing gain. The S&P 500 followed a similar intraday pattern, but closed unchanged. Due largely to a 27% drop in Dow component Merck and Company, the Dow Jones Industrial Average closed with a 0.6% loss. Volume in the Nasdaq once again increased by 2%, marking the third consecutive “accumulation day” in which the index closed higher and on higher volume. Volume in the NYSE surged a whopping 25% over the previous day, and was the highest volume day since July 22. This, however, was largely attributed to Merck’s huge volume increase of 145 million shares compared to its average volume of 5.3 million shares.

The Semiconductor Index ($SOX) started out strong and was showing a 2.6% gain at its intraday highs, but it drifted lower and closed only 1.1% higher, and in the middle of yesterday’s range. The clear winner yesterday was once again the Gold/Silver Mining Index ($XAU), which gained another 2.6% yesterday and closed near its session high. Since the September 21 breakout we pointed out to subscribers, the $XAU Index has gained nearly 8%, not a bad gain in the span of eight trading days. Due to approaching resistance of the prior highs from April, we sold into strength and took profits on partial share size of each of our gold and silver stocks yesterday, but still remain long approximately half our original position size in each one. If you have not already done so, you may consider taking profits on at least partial share size, but we’re still bullish on the intermediate-term direction of the gold and silver miners. The uptrend in $XAU has been smooth and steady ever since the September 21 breakout above the 200-day MA, which also correlated to a break of the weekly downtrend line:

Because the major indices traded in a narrow range and closed nearly unchanged, the same resistance levels we discussed in yesterday’s newsletter remain in effect going into today. Rather than being redundant, click here to jump to yesterday’s newsletter so you can review the key levels to watch on the S&P and Nasdaq. Overall, we remain moderately bullish on the Nasdaq, but are more cautious about the S&P and Dow. As long as the price to volume relationship in the Nasdaq remains positive, our bias does too. But, if we begin to see “up” days on declining volume, or “down” days on heavier volume, we will lose our bullish bias.

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Today’s watch list:

There are no new plays for today, although we remain long both SWH and SMH for swing.

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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:

(none)

Open Positions:

SWH long (from Sept. 28) –
bought 34.14, stop 34.10, target 35.60, unrealized points = + 0.60, unrealized P/L = + $120

SMH long (from Sept. 30) –
bought 30.26, stop 29.40, target 32.20, unrealized points = (0.02), unrealized P/L = ($6)

Notes:

We are now long SMH and SWH, with same stops as yesterday.

Edited by Deron Wagner,
MTG Founder and
President