Commentary:

True to its indecisive nature of late, the broad market staged a rally yesterday that pushed the major indices back above key technical levels. A rebound in the Insurance sector helped push the S&P 500 Index to an impressive 1.5% gain, while the Dow Jones Industrials similarly closed 1.4% higher. The Nasdaq Composite, which was formerly leading both the S&P and Dow in past weeks, lagged behind yesterday and only gained 0.8%. Total market volume on the NYSE was a solid 22% higher than the previous day, and volume on the Nasdaq increased by 13%. Volume in both markets was well above the 50-day average levels. Because the major indices closed higher yesterday and on higher volume, it was technically an institutional “accumulation day.”

Over the past several days, we have spoken about the importance of the 1,100 level, which coincided with the prior low from September, as being a key area of support on the S&P 500 Index. The S&P closed below the 1,100 level last Friday and again on Monday, but moved firmly back above it yesterday. This, of course, is bullish. However, the S&P now has a lot of overhead resistance to contend with, such as the 20, 50 and 200-day moving averages. Therefore, it seems likely we can expect the index to remain choppy as long as it trades above Monday’s low, but below the 200-day MA (currently at 1,119). The daily chart of the S&P below illustrates this:

The Dow Jones Industrial Average, which recently broke below its prior lows from August, rallied back up into the range yesterday as well. Expect the same story with the Dow, given the amount of overhead supply and resistance that has been created from the weakness of the past several weeks:

The Nasdaq Composite Index, which has been testing support of its primary uptrend line from its August low, continues to hold above support of its uptrend line. Of the three major indices, this is the only one that is trending smoothly on an intermediate-term basis. But, notice how choppy it has been during the past two weeks:

The good news for the market is that both earnings and the election will soon pass. When that happens, we may not know which direction the market will go, but it should at least begin to trend a bit smoother. As short-term traders, the “trend is our friend,” so just give us a trend one way or the other.

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Today’s watch list:

There are no new plays for today, although we remain short RTH (Retail HOLDR).

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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:

RTH short (from Oct. 25) –
shorted 90.63, stop 92.30, target 87.80, unrealized points = (1.32), unrealized P/L = ($132)

Notes:

No changes to the RTH stop.

Edited by Deron Wagner,
MTG Founder and
President