The Wagner Daily


As we typically see on option expiration days, the broad market traded in a choppy, sideways range last Friday, but the major indices managed to close mostly higher. Most stocks began the day with an opening gap higher, but the quarterly expiration of options and futures contracts kept any potential upside momentum in check. Nevertheless, the S&P 500 gained 0.5% and the Dow Jones Industrial Average moved 0.4% higher. It was the seventh consecutive day of gains in the Dow, but the first day in which the index broke out above the high of its 4-week trading range. The Nasdaq Composite began the day with a 0.4% upside opening gap, but continued resistance of the 2,100 level caused the index to close less than 0.1% higher. The S&P 400 Mid-Cap Index gained another 0.2% to set a new record high for the fourth consecutive day. The index moved 2% higher for the week. Leading sectors last Friday were Oil, Utilities, Pharmaceutical, and Biotech. The AMEX Biotech Index ($BTK) rose 1.9%, which now gives us an unrealized gain of 3 points in BBH (Biotech HOLDR).

Total volume in the Nasdaq rose by 13% last Friday, while volume in the NYSE surged 42% higher. The increase in volume combined with broad-based percentage gains gave the S&P and Dow another bullish “accumulation day.” Much of the volume increase, however, was likely attributed to the “quadruple witching” options expiration day. Advancing volume in the NYSE exceeded declining volume by a ratio of 2 to 1, which is positive, but internals were mixed in the Nasdaq. Regardless, since the beginning of June, a majority of the “up” days have been on higher volume, while the “down” days have mostly been on lighter volume. This is indicative of a healthy market, especially considering the major indices corrected only modestly in price during the past several weeks.

Last week’s gains put both the S&P 500 and Dow Jones at new 3-month closing highs. But the Nasdaq Composite once again failed to break out above that pesky 2,100 resistance level, which corresponds to the prior highs from both February and March. As the daily chart below illustrates, it was the fourth time this month that the index tried, but failed to close above 2,100:

Needless to say, keep an eye on the 2,100 level in the coming week. If the Nasdaq is unable to close above 2,100 within the next several days, it may trigger a selloff that could easily take the Nasdaq back down to the low of its current range. However, we feel the weekly strength in the Semiconductor Index ($SOX) will push the Nasdaq higher. Although it probed below it on an intra-week basis, the $SOX closed above key support of its 200-week moving average for the third consecutive week. This has resulted in a bullish sideways consolidation that will probably push the $SOX to new highs this week. As such, we remain bullish on our position in SMH (Semiconductor HOLDR), as well as the BBH and PPH (Pharmaceutical HOLDR) positions.

One ETF we have not discussed much lately is GLD, which is the ETF that tracks the price of spot gold. Long-time subscribers may recall that we profited from several gold stocks on numerous occasions during the rally in spot gold that lasted throughout most of last year. But after spot gold peaked in early December of 2004, we stopped monitoring it because it entered into a correction on its weekly chart. Nevertheless, if you’re a gold bug, the good news is that gold appears to have finished its correction and has resumed its long-term uptrend. As the 3-year monthly chart below indicates, the price of spot gold has resumed its 3-year uptrend after correcting down to trendline support at the beginning of this month:

For those of you who are not aware, a new ETF was launched in November of 2004 that tracks the price of spot gold. GLD is set up so that the price of 1 share roughly correlates to one-tenth the price of spot gold. Its last closing price of $43.63 was approximately one-tenth the price where spot gold traded at last Friday ($436). We showed you the 3-year chart of spot gold above rather than GLD itself because it has only been trading for eight months. Be sure to realized that the price of spot gold trades continuously, but GLD only trades during regular market hours. Therefore, it gaps open frequently, based on the overnight price change in spot gold. But if you’re looking for a long-term ETF position that is in a multi-year uptrend, and one that will diversify your holdings as well, consider buying GLD.

Today’s Watchlist:

There are no new trade setups for today, as we are now long three ETF positions (BBH, SMH, and PPH).

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:

    BBH long (from June 16) –
    bought 167.95, stop 165.10, target (new highs, will trail stop), unrealized points = + 3.03, unrealized P/L = + $303

    PPH long (from June 7) –
    bought 74.56, new stop 73.60, target 79.60, unrealized points = + 0.69, unrealized P/L = + $69

    SMH long (from June 1) –
    bought 34.82, stop 32.10, target 44.90, unrealized points = (0.38), unrealized P/L = ($114)


We raised the stop on PPH, as per above.

Edited by Deron Wagner,
MTG Founder and