The Wagner Daily


The broad market followed through on last Friday’s late-day bullish reversal, but volume in the Nasdaq was suspiciously light and failed to confirm the percentage gains. Strength in Utilities, Mining, and Oil-related stocks led the S&P 500 to a 0.8% gain yesterday, while the Dow moved 0.6% higher. The Nasdaq Composite showed relative strength and closed with a decent gain of 1.3%, but total volume in the Nasdaq came in 12% lighter than the previous day. At 1.8 billion Nasdaq shares, yesterday was the lightest volume day of January, exactly the opposite of what you should see on a follow-through reversal attempt. Volume in the NYSE was 2% higher than the previous day, but less than the volume of several bearish “distribution days” earlier in the month. If total market volume would have surged higher across the board, yesterday would have been a solid day for the bulls, but any rally attempt on the same or lighter volume can never be trusted.

Despite the lack of volume, the Nasdaq managed to rally above resistance of its daily downtrend line. However, the index closed right below an area of price resistance, as illustrated by the red horizontal line below:

The area of resistance at the 2,065 to 2,067 level is formed by a combination of the prior lows from mid-January and the high of January 20. Above that, the 20-day MA looms overhead, with resistance of the 50-day MA at the 2,109 level. Due to the amount of overhead supply and technical resistance between its current price and the 2,110 level, a surge in volume is required in order for the Nasdaq to advance from here.

Although the S&P 500 technically registered a bullish “accumulation day” by moving higher and on higher volume, the index closed right at resistance of its daily downtrend line:

While it’s positive to see the Nasdaq above its downtrend line, it’s too soon to declare the index has reversed to the upside. Currently, the two main problems for the bulls are the fact that the Nasdaq broke out on its lightest volume of the year and the S&P 500’s inability to follow the Nasdaq by closing above its downtrend line. When the major indices get out of sync with each other, conditions often become choppy and indecisive. The Feds are also beginning a two-day meeting on interest rates today, which is likely to give the market additional cause for caution until tomorrow afternoon. Until we begin to see at least a few high volume “up” days, we continue to view any modest rallies as low-risk opportunities to initiate new short positions. As always, trade what you see, not what you think!

Today’s watch list:

There are no new plays for 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:

    DIA short (from Jan. 20) –
    shorted 104.95, stop 105.90, target 101.49, unrealized points = + 0.15, unrealized P/L = + $30

    SPY short (HALF position, from Jan. 21) –
    shorted 117.35, new stop 10 cents above 20-minute high, target 115.35, unrealized points = (0.81), unrealized P/L = ($81)

    IWM short (from Jan. 28) –
    shorted 122.20, stop 125.10, target 114.20, unrealized points = (0.60), unrealized P/L = ($60)


We have changed the stop on SPY to 10 cents above the high of the first 20 minutes due to the fact that it is gapping up to within a few pennies of the original stop. Also, yesterday’s Wagner Daily had a typo that showed the stop and target price of IWM reversed. It has been corrected today.

Edited by Deron Wagner,
MTG Founder and