The Wagner Daily


After beginning the day with an opening gap up, the broad market spent the morning in a downtrend and eventually “filled the gap.” But buyers stepped in at mid-day, causing the major indices to reverse their morning trends and rally above their respective morning highs. Both the S&P 500 and Dow Jones Industrial Average gained 0.9%, while the Nasdaq Composite moved 1.0% higher. Each of the major indices also closed at their highest levels of the day, which increases the odds of upside follow-through today.

Taking a look at the internals, total market volume in the NYSE was on par with the previous day’s level, but volume in the Nasdaq came in 15% higher. Considering yesterday’s solid gains in the S&P and Dow, it would have been more bullish to see an increase in NYSE volume. Conversely, volume actually did pick up in the Nasdaq, which means the index had an institutional “accumulation day” yesterday. Be aware, however, that a big reason for the Nasdaq volume increase was due to the surge in volume of both Oracle and Peoplesoft, both of which saw huge volume spikes due to yesterday’s merger announcement.

Yesterday’s broad-based gains caused both the S&P and Dow to close at new highs, above the consolidation of the past several weeks. Specifically, the S&P rallied above the 1,192 resistance level that we discussed yesterday, and also closed at a new multi-year high not seen since August of 2001. The Dow, while still below its prior highs from the beginning of this year, managed to break out above last month’s range and close at a new nine-month high. Although it gained 1.0%, the Nasdaq Composite Index continued to show relative weakness to both the S&P and Dow because the index remains below its December 7 high. This divergence continues to provide us with a good reason for caution on the long side of the market, particularly in the short-term.

The fact that both the S&P and Dow were able to close at new highs despite the lack of an increase in volume is a good example of how stocks and indices that are trading near their 52-week highs will often continue to set new highs in subsequent days and weeks. This is often caused not by an abundance of buyers, but rather a lack of sellers. Quite simply, stocks and indexes trading near 52-week highs lack the overhead supply that causes resistance. Therefore, it doesn’t take a lot of buyers to push the indices higher. This is also the reason that many of our most successful plays with individual stocks and ETFs are simply buying breakouts to new 52-week highs. Realize, however, that upside breakouts are more likely to fail in a bearish environment.

Today, at 2:15 pm EST, the FOMC will announce their decision on any changes in the Fed Funds Rate. Analysts are expecting a 98% probability of a quarter-point rate hike in today’s meeting, which the market has likely priced in. The real focus, however, will be on the forward-looking comments the Feds make with regard to future interest rate increases. As always, remember that the actual news doesn’t matter, but it is the market’s reaction that matters. Therefore, because of the Fed meeting, you may want to lay low today and remain mostly on the sidelines. We’ll take a look at some more charts tomorrow, after we see how the market reacts to the Fed announcement.

Today’s watch list:

Due to the FOMC meeting today, there are no new plays. We are, however, still long BBH and short 1/2 position of QQQQ.

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:

    BBH long (from Dec. 9) –
    bought 146.60, stop 141.70, target 160.20, unrealized points = + 0.27, unrealized P/L = + $27

    QQQQ short (HALF position, from Dec. 7) –
    shorted 40.09, new stop is 10 cents over the high of today’s first 30 minutes of trading, target 37.80, unrealized points = (0.19), unrealized P/L = ($38)


Per the MTG Opening Gap Rules, we adjusted the stop on QQQQ to just above the 20-minute high, which was never taken out yesterday. We will use the same rule today. The HHH short setup never triggered.

Edited by Deron Wagner,
MTG Founder and