The broad market began the week on a positive note, as the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite moved higher by 1.0%, 1.1%, and 0.9% respectively. Unlike the prior two days, the major indices traded in sync with each other and most sectors closed in positive territory. The major broad-based indices each closed at their intraday highs, but the one thing sorely lacking from yesterday’s session was signs of institutional support.
Despite approximate gains of one percent in both the S&P 500 and Nasdaq Composite, total market volume declined significantly in both exchanges. Overall volume in the Nasdaq declined by a whopping 24%, while total volume in the NYSE came in 15% lighter than the previous day. Like most of the recent days, we continue to see the same bearish pattern of lighter volume on most of the broad market’s “up” days, but heavier volume on a majority of the “down” days. Until that pattern of changes, the risk of aggressively entering new long positions remains high. Most light volume rallies are short-lived because it only takes one day of institutional selling to erase all the gains (and then some).
Yesterday’s rally put the S&P 500 back above the all-important 200-day moving average, but the index remains below its 50-day MA, which is 10 points above yesterday’s close. During last week’s rally attempt, the 50-day MA put the brakes on the S&P’s upward move, so it’s likely to remain a key area of resistance for the remainder of this week as well. The Dow Jones Industrial Average, which has been showing relative weakness to the S&P, remains below both its 200 and 50-day moving averages. The additional overhead supply is the reason we are short DIA instead of SPY. Going into today, the big technical focus will be on whether or not the Nasdaq Composite can rally above resistance of its 200-day moving average. The daily chart below illustrates how the index closed right below this key area of resistance:
Our overall thoughts remain the same as we have discussed for the past several days. The market is clearly showing divergence, so put the odds of success in your favor by trading alongside the institutional money flow. On the long side, the tech-related sectors and stocks are the place to be in the short-term. On the short side, Utilities and Oil-related sectors continue to show the most weakness. Caution against getting too heavily loaded on either side of the market is advised for the time being.
There are no new trade setups for today because we currently have three open ETF positions (short DIA, XLF, and UTH)
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.
UTH short (from May 13) –
shorted 103.64, stop 105.60, target 99.10, unrealized points = + 1.21, unrealized P/L = + $121
DIA short (from May 10) –
shorted 103.17, stop 103.69, target 97.20, unrealized points = + 0.53, unrealized P/L = + $106
XLF short (from May 12) –
shorted 28.63, stop 29.28, target 27.10, unrealized points = (0.10), unrealized P/L = ($60)
No changes to stops on open positions.
Edited by Deron Wagner,
MTG Founder and