The Wagner Daily


The major indices opened the week on a positive note during the first thirty minutes of trading yesterday, but the excitement quickly faded. The broad market trended steadily lower throughout the remainder of the day, although the volume of the selling was not as intense as the previous two days. The Nasdaq Composite continued to show relative weakness and closed lower for the third consecutive day, although the loss was only 0.3%. Despite continuing weakness in Pfizer, the Dow Jones Industrial Average eked out a 0.1% gain. The S&P 500 Index closed flat. Total market volume was lower across the board, which prevented the broad market from having three consecutive “distribution days.” In the NYSE, volume came in 42% lighter than the previous day (which was inflated due to options expiration). Volume in the Nasdaq was 19% lower.

In yesterday’s newsletter, we looked at charts of the Nasdaq indices. QQQQ, which had closed below its 20-day moving average for the first time since October 26, moved lower yesterday and remains below its 20-day MA. Prior support of that 20-day moving average should now act as resistance on any rally attempt, so we have lowered our trailing stop in the QQQQ short position to just above yesterday’s high. The broader based Nasdaq Composite Index once again attempted to break out above that major resistance of 2,152 yesterday morning, but failed once again. The Nasdaq’s closing price of 2,127 puts it right on support of its 20-day MA. Obviously, the prior high from January, at 2,152, remains the key area of resistance to watch on the Naz Composite.

The S&P 500 Index closed unchanged, so not much has technically changed for its daily chart. However, the index is now sitting right on support of its primary uptrend line from the October low. The daily chart of the S&P 500 below illustrates this:

Even if the S&P breaks its uptrend line, there is a lot of horizontal price support at the 1,190 area from the past month. So, a break of the uptrend line may not immediately generate a sharp selloff. As you probably surmised, the proximity of the S&P to its uptrend line means that its performance over the next several days will be key to determining its trend over the next several weeks. However, the problem is that volume is likely to continue drying up as we approach Christmas Day, so we may not know the real intentions of heavy institutional traders until after the holidays.

Like the S&P, the Dow is holding above support of its primary uptrend line, and actually looks a bit stronger than the S&P. Take a look:

Notice how the uptrend line on the Dow also converges with the horizontal price support at the 10,600 area. A break below that convergence would be quite bearish, but there is not yet any clear reason to expect that will happen within the next few days. The Nasdaq has already broken support levels, but both the S&P and Dow have not. Therefore, we have some pretty mixed signals overall. Again, the light volume of the pre-holiday week is going to make it difficult to really determine what’s happening beneath the surface.

Remember that the stock markets are closed the full day this Friday, Christmas Eve, so expect volume to begin tapering off around mid-week. Don’t be too anxious to enter new positions until after the holidays, as cash is usually your best bet when the market is showing mixed signals. As always, remember to trade what you see, not what you think!

Today’s watch list:

There are no new setups for today, although we remain long a full position of BBH and short 1/2 position 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 145.10, target 160.20, unrealized points = + 1.38, unrealized P/L = + $138

    QQQQ short (HALF position, from Dec. 7) –
    shorted 40.09, new stop 39.95, target 37.80, unrealized points = + 0.89, unrealized P/L = + $178


Note the new stop on QQQQ.

Edited by Deron Wagner,
MTG Founder and