The Wagner Daily | June 23, 2005

Commentary:

The major indices once again traded in a choppy and lackluster fashion before closing near unchanged levels. The Nasdaq Composite gapped up to open at the 2,100 level, but that area of resistance once again caused the index to retrace modestly lower. Nevertheless, the Nasdaq closed fractionally higher by less than 0.1%. The S&P 500 Index followed a similar intraday pattern and also gained less than 0.1%. The Dow Jones Industrial Average showed slight relative weakness by trending lower intraday and closing with a 0.1% loss. After a minor two-day correction, the S&P 400 Mid-Cap Index resumed its strong upward trend by gaining 0.1%. Small cap stocks also continued their recent leadership, as the Russell 2000 Small Cap Index moved 0.4% higher yesterday.

Total market volume in both the NYSE and Nasdaq increased by 6% over the previous day’s session. Although the gains in the S&P and Nasdaq were small, yesterday still technically qualifies as yet another bullish “accumulation day.” Of the last seven “up” days in the Nasdaq, six have been on higher volume. This shows an underlying health to the market as it continues to consolidate and digest last month’s gains. Market internals were mixed yesterday, but this is typical of a consolidation day in which the indices close near the flat line.

Although we would be pleased to provide you with exciting new chart analysis of the major indices in today’s Wagner Daily, the reality is that nothing can be said that we have not already said within the past several days. The broad market is correcting by time through a sideways consolidation that allows the moving averages to rise up and provide support. This is healthy for the markets because it provides a base of support from which the indices can rally, but it requires patience for the next trend to take shape. As long as the Nasdaq remains in its recent range, there’s not much to discuss. Short-term support levels in the Nasdaq continue to be: 2,076 (20-day moving avg.), 2,053 (low of June), and 2,026 (200-day moving avg.). Resistance is obviously at the 2,100 area. Support on the S&P 500 is between the 1,200 to 1,205 range. Resistance on the S&P is the four-day high at the 1,219 level. The Dow is still holding above its prior resistance level (new support) around the 10,570 area.

Since there is nothing new to discuss with the major indices, let’s take an updated look at our three open ETF positions. Overall, each one still looks good on the daily and weekly charts. SMH, which we entered back on June 1, continues to consolidate near its highs in a narrow range. The 200-week moving average, which acted as resistance for several years prior to this month, has now become the new support level. SMH has perfectly bounced off and closed above its 200-week MA for the past four weeks and appears it will do so for the fifth time this week. $35.31 is the high of the past four weeks, so that is the magic number SMH needs to break out above. If it does so, it will have firmly cleared prior resistance of its double top on the weekly chart as well. The pink horizontal line marks prior resistance from both December 2004 and March 2005:

Like SMH, PPH is also consolidating in a tight range near its recent highs. The daily chart shows support of both the 20 and 50-day moving averages just below. Most importantly, the longer-term monthly chart of PPH shows it holding above the prior resistance of its 5-year downtrend. PPH looks great as long as it holds above that prior downtrend line, which has become the new support level. Below is the monthly chart of PPH:

Finally, BBH is also holding near its multi-year highs, although it began to correct two days ago after testing resistance of its June 2 high. BBH is a bit more extended than the other indices, so it could correct further from here, but it is more likely to correct by time and trade sideways instead. All three of our positions look good, but remember to always honor your stops regardless. Most importantly, Trade what you see, not what you think!

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:

(none)

Open Positions:

unrealized P/L = + $50

BBH long (from June 16) –
bought 167.95, stop 165.10, target (new highs, will trail stop), unrealized points = + 0.15, unrealized P/L = + $15

SMH long (from June 1) –
bought 34.82, stop 32.10, target 44.90, unrealized points = (0.08), unrealized P/L = ($24)

Notes:

No changes to the open positions above.

Edited by Deron Wagner,
MTG Founder and
President