The Wagner Daily


Yesterday’s intraday market action was nearly a repeat of the previous day, and the major indices also closed with about the same percentage changes. Like Monday, the broad market opened nearly flat, then spent the remainder of the day oscillating in a relatively narrow, sideways range. The Dow Jones Industrial Average once again closed flat, while the S&P 500 Index dropped a nominal 0.1%. One difference in yesterday’s action, however, was the mild relative strength in the Nasdaq Composite, which gained 0.2%. At one point, the Nasdaq rallied above its consolidation to a new high, but its resistance from the prior high (discussed in yesterday’s newsletter) caused the index to drift back down into its prior range. The 2,050 price area is, once again, proving to be formidable resistance for the Nasdaq.

Although the broad market’s intraday action and closing prices were about the same for the past two days, one notable difference was the volume. Volume in the NYSE declined by 21% during Monday’s consolidation day, but increased by 7% yesterday. Because the S&P 500 closed lower (albeit only 0.1% lower), yesterday was technically a “distribution day” in the NYSE. Because of the large number of bullish “accumulation days” we have seen in the market during the past several weeks, it’s not too surprising to see an increase in selling activity for a day, and the supply created from a day of distribution can be easily absorbed in a bullish environment. However, we also know that volume typically leads price and always acts as an early warning system. Therefore, another day or two of losses on higher volume would indeed give us reason to be very cautious on the long side. But, for now, the market continues to act fine and is absorbing its recent gains nicely. Even better is the fact that the Nasdaq’s total market volume actually increased by 6% yesterday, which is bullish because the index closed higher on the day.

Since the daily and weekly charts of the major indices look the same as yesterday, we won’t be redundant and show you those same charts again today. In summary, the S&P 500 continues to digest its recent gains nicely and is correcting by time, rather than price, which is bullish. The key will be whether or not the index is able to hold above its prior high from March, around the 1,163 area. If it does, then we could see the start of a new, intermediate-term uptrend. But, it’s a bit too early to determine that yet. The Nasdaq also needs to clear the overhead resistance at the 2,050 area, which is only likely to happen if the $SOX index breaks above its weekly downtrend. Again, we feel it all comes down to the performance of the Semis here. We continue to expect a breakout in that index, which is why we remain long SMH (Semiconductor HOLDR).

All eyes will be on the Feds today, as the FOMC is scheduled to announce their decision on interest rates at 2:15 pm EST. The general consensus is they will raise the fed funds rate by 1/4 point, up to 2%. The big question on traders’ minds will be whether or not the Feds are planning on hiking rates again in December. As always, we don’t care about the actual outcome of the FOMC meeting; rather, all that matters is the market’s reaction to their announcement. Trading volume is typically light during the first half of FOMC days, so take it easy with entering new positions. After the announcement is made at 2:15 pm, expect a lot of volatility. Therefore, it’s probably a good idea to just manage your open positions and not worry about entering new trades today. We’ll re-assess the market environment tomorrow, after we see how the broad market reacts to today’s announcement on rates.

Today’s watch list:

Due to the FOMC meeting, there are no new ETF trade setups we are stalking for entry 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.

Closed Positions:


Open Positions:

    SMH long (from Nov. 8) –
    bought 33.10, new stop 32.30, target 35.55, unrealized points = (0.36), unrealized P/L = ($108)


PPH did not hit its trigger price, so we have removed it from our watch list. We do, however, remain long SMH. As the market is gapping down a bit in the pre-market, remember to use the MTG Opening Gap Rules to manage the stop in SMH.

Edited by Deron Wagner,
MTG Founder and