The Wagner Daily | June 14, 2005

Commentary:

The major indices sprinted firmly higher yesterday morning, but the bulls promptly disappeared at mid-day, causing the broad market to drift lower throughout the afternoon. The Nasdaq Composite gained 0.3%, the S&P 500 gained 0.2%, and the Dow Jones Industrial Average moved 0.1% higher, but each index closed near the middle of its intraday range. Yesterday was similar to the price action of June 7, as the broad market showed a lot of momentum in the morning, but the enthusiasm faded in the afternoon. It was also interesting that the best performing industry sectors were quite diverse yesterday. Software, Gold & Silver Mining, Healthcare, Telecom, and Oil sectors showed the highest percentage gains. TTH (Telecom HOLDR) has been doing well since we highlighted it as a long idea last week. Financial, Semiconductor, and Internet sectors showed the most weakness yesterday, but each sector closed near unchanged levels.

Total volume in both the NYSE and Nasdaq exchanges was 2% higher than the previous day’s levels. The increase in volume combined with higher closing prices technically made yesterday a bullish “accumulation day.” However, we do not place too much importance on yesterday’s “accumulation day,” as the indices closed relatively weak and only fractionally higher. Nevertheless, the slight increase in volume and higher closing prices enabled the broad market to continue the bullish price to volume relationship that remained intact throughout last week’s correction.

Yesterday’s minor percentage gains in the broad market did not change the technical picture of the major indices. The S&P, Dow, and Nasdaq still have the same support and resistance levels we discussed in yesterday’s Wagner Daily. Rather than being redundant, please click here if you wish to review those key support and resistance levels. Although the market has been a bit lethargic and non-committal for the past two weeks, we view its recent action as bullish in the overall scheme of the trend. The Nasdaq got a bit ahead of itself during its May rally, so now the index is simply digesting those gains. It is bullish that the index has traded sideways near the high of its range, rather than retracing significantly in price.

The formation of the current base of support in both the Nasdaq and the Semiconductor Index should eventually result in another tech breakout above the May highs. We’re prepared and remain positioned long in SMH (Semiconductor HOLDR). We also continue to hold PPH (Pharmaceutical HOLDR) due to the index’s recent break of its weekly downtrend. On the short side, we continue to hold RTH (Retail HOLDR), as it remains below resistance of the upper channel of its weekly downtrend line.

Today’s Watchlist:

There are no new trade setups today, as we currently have three open positions (SMH and PPH long, RTH short).

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:

(none)

Open Positions:

unrealized P/L = ($84)

PPH long (from June 7) –
bought 74.56, stop 73.20, target 79.60, unrealized points = (0.53), unrealized P/L = ($53)

RTH short (from June 9) –
shorted 94.55, stop 96.35, target 88.30, unrealized points = (0.85), unrealized P/L = ($85)

Notes:

There are no changes to the open positions.

Edited by Deron Wagner,
MTG Founder and
President