The Wagner Daily


For the second consecutive day, the S&P 500 Index closed flat and indecision remained the prevalent theme. The Dow showed relative weakness and managed to gain 0.2%, but the Nasdaq lagged behind and shed 0.4%. Volume in the NYSE came in 3% higher than the previous day’s level, but total market volume in the Nasdaq declined by 5%. Like the previous day, market internals were mixed and failed to show any clear bias. The longer the major indices fail to really move in either direction, the bigger the move will be when the broad market finally breaks out of the range. The big question, of course, is which direction the move will go.

The intraday range between yesterday’s high and low in the S&P 500 was nearly the same as the previous day. Because the S&P once again closed unchanged, yesterday’s market action caused a “doji star” candlestick pattern to form on the daily chart. This pattern is recognizable by the long “tails” or “wick” both above and below the body of the candlestick. The body is narrow because it shows a closing price near or the same as the opening price. We have circled the two consecutive “doji star” candlesticks on the daily chart of the S&P 500 below:

Because the trading range of the past two days was the same, the highs and lows of the past two days have now become important areas of short-term support and resistance. The 1204 level (as indicated by the horizontal blue line above) has become short-term support, while near-term resistance is at the 1215 area. More important than the highs of the past two days, remember that the 1215 area also correlates with the closing highs from last December. If the S&P closes above that level, it will mark a new 52-week closing high. All eyes remain on this level.

As for the Nasdaq, yesterday’s weakness was partially attributed to a price correction in the Semiconductor Index, which closed 1.2% lower. However, the $SOX did close off its intraday low after coming into support of both its uptrend line and 20-day moving average yesterday. Interestingly, the 20-day MA and lower channel of the uptrend line have perfectly converted, which the daily chart below illustrates:

When the current week began, we said that a sideways week of consolidation in the $SOX would actually be healthy because it would enable the moving averages to rise up and provide support to the index. Furthermore, it would build a base from which the Semis could stage their next rally. Therefore, assuming the $SOX holds above yesterday’s low, this is exactly the type of price action we want to see in this index during the past week. While it means we have to be a bit more patient with our SMH position, sideways consolidation also increases the likelihood of a strong rally next week. Conversely, a closing break below the 20-day MA, and hence the daily uptrend line, would not be too good and would call caution into the recent $SOX strength.

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 = + 1.38, unrealized P/L = + $206

    PPH long (from Feb. 22) –
    bought 72.19, stop 71.10, target 76.75, unrealized points = + 0.32, unrealized P/L = + $32


No changes to the stops on our open positions.

Edited by Deron Wagner,
MTG Founder and