The Wagner Daily


Another day of gains in the Semiconductor Index ($SOX) enabled the Nasdaq Composite to erase all of its losses from the previous day and close 1% higher. Both the S&P 500 and Dow Jones Industrials registered gains of 0.6%. Total market volume in the NYSE was 5% lighter than the previous day, while volume in the Nasdaq came in 8% lower. Given the previous day’s distribution, it would have been better to see yesterday’s gains occur on higher volume, but market breadth was firmly positive. The Nasdaq Composite showed leadership for a change, thanks primarily to another gain of more than 2% in the $SOX.

After correcting for only one day, the $SOX rallied another 2.2% and closed at a new 8-month high yesterday. Yesterday’s close of 447 in the $SOX now puts the index seven points above the prior resistance of its 200-week moving average. Therefore, we now anticipate the $SOX will begin forming a base of support around the 440 area. While the Semiconductor Index set a new 8-month closing high yesterday, the December 3 intraday high of 453 remains the area of near-term resistance to watch. As mentioned a few days ago, a confirmed close above the December high would represent the first major trend reversal in the $SOX in approximately three years. The ability of the $SOX to hold above its 200-week moving average is also quite positive. Overall action in the index gives us every reason to maintain our bullish bias on the Semis and to hold our remaining half position in SMH (Semiconductor HOLDR).

As you know, the Nasdaq Composite has been lagging behind both the S&P and Dow for several months. However, we feel that is about to change due to the renewed strength in the Semis. If money continues flowing into the semis and the Nasdaq, it may keep the S&P and Dow advances in check. Keep in mind that institutional money is always being rotated from one sector to another. Because of the buying power behind the “big money,” it is always a good bet to simply follow in the footsteps of the institutional money flow. Therefore, if you are long the market, the Nasdaq probably offers the best risk/reward, especially within the technology arena.

Yesterday’s gains in the Dow and S&P once again put both indices within striking distance of their prior highs, which both indices have recently attempted to rally above several times. Rather than being redundant and showing you the same charts again, please review the February 28 issue of The Wagner Daily to see those areas of horizontal price resistance on both the S&P and Dow. Going into today, those same resistance levels remain valid. If both indices can break out, AND on high volume, then we may become comfortable with trading the broad-based ETFs once again. In the interim, however, it appears a much safer bet to continue trading those sector ETFs that are showing relative strength the major indices. Obviously, SMH is one such play, and PPH (Pharmaceutical HOLDR) is another sector ETF that is acting well.

Today’s watch list:

We continue to feel there is a better to risk to trade the industry sector-specific ETFs, rather than the broad-based ones. As such, we are not looking to enter any new ETF trade setups today, but we remain long both SMH and PPH (each with a solid unrealized gain).

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 (HALF position, from Feb. 7) –
    bought 32.55, stop 33.20, no target (trailing a stop), unrealized points = + 2.24, unrealized P/L = + $336

    PPH long (from Feb. 22) –
    bought 72.19, stop 71.10, target 76.75, unrealized points = + 0.46, unrealized P/L = + $46


No changes to the stops on our open positions.

Edited by Deron Wagner,
MTG Founder and