The Wagner Daily


The major indices wrapped up last week with a day of modest, light volume gains in Friday’s pre-holiday session. It was a choppy and lethargic day, but the S&P 500 and Dow Jones Industrial Average both gained 0.3%. The Nasdaq Composite closed less than 0.1% higher. As we have recently become accustomed to seeing, small and mid-cap stocks once again outperformed the “big 3” indices. The S&P 400 Mid-Cap Index gained 0.7%, while the Russell 2000 Small Cap Index moved 0.5% higher. The relative strength of the small and mid-cap stocks was apparent not only on Friday, but also when comparing results for the week. Both the Nasdaq and S&P 500 gained 0.2% and the Dow Jones moved 0.1% higher last week. The S&P 400, however, cruised 1.9% higher, while the Russell 2000 surged 2.1% higher. It was an indecisive week for the major indices overall, but small and mid-cap stocks ignored the broad market’s lack of direction and closed near their 52-week highs.

As is typical ahead of three-day holiday weekends, volume in both exchanges dropped off sharply in last Friday’s session. Total volume in the NYSE was 27% lighter, while turnover in the Nasdaq came in 29% lower than the previous day’s level. Because institutional traders often leave the trading floor early ahead of holiday weekends, the true intentions of institutional buying or selling activity was hidden in last Friday’s session. Therefore, it is probably wise to discount Friday’s gains or losses in any of the industry sectors or major indices.

In the June 28 issue of The Wagner Daily, we illustrated how the broad market correction from June 23 to 27 left each of the major indices at key Fibonacci support levels. The latter half of last week subsequently saw a solid bounce on June 28, but the erosion of those gains only two days later. Going into this week, we see that each of the major indices closed above last week’s lows, but now must contend with even more overhead supply. The short-term support and resistance levels are now clearly defined as the respective lows and highs of last week. The charts below illustrate the key support and resistance levels to watch on the broad-based ETFs over the next several days. We’ll begin with the daily chart of SPY (S&P 500):

As you can see on the chart above, key support is at the 118.80 area, which marks convergence of the 50-day moving average and the June 27 low. Similarly, resistance of the 20-day moving average has converged with last week’s highs at the 120.35 area. Next, take a look at the daily chart of DIA (Dow Jones Industrial Average):

Support on DIA is the June 27 low of 102.44, but there is an abundance of overhead supply between the 104 to 104.75 area that will make it challenging for the Dow to move higher in the short-term. Resistance of the 20, 50, and 200-day MAs, as well as last week’s high, are all between 104 to 104.75. Needless to say, it probably will not be easy for the Dow to eat through all that overhead resistance. Finally, take a look at QQQQ (Nasdaq 100 Index):

Relative weakness in the Nasdaq caused QQQQ to close near its worst level of last week. Short-term support is last week’s low, which is only a few pennies below Friday’s closing price of $36.72. Resistance of the 50-day moving average is just below Friday’s high, at the $36.94 level. Above that, notice how the 200-day moving average has converged with last week’s high at the $37.30 area. The 20-day MA is at $37.52.

If you’ve been having a difficult time making profits from the market lately, don’t feel bad about it. Short-term traders can profit equally from uptrends and downtrends, but markets that are stuck in choppy, sideways trading ranges are the most difficult ones to profit from. Unfortunately, this has been the situation for many of the major indices and sectors. The broad market will eventually resolve its indecision and begin a new trend in one direction or the other, but it is advisable to maintain a cash position and/or reduced share size until that happens. In the short-term, we recommend doing nothing new until the major indices illustrated above either break out above last week’s highs or close firmly below last week’s lows. Pareto’s Principle (the “80/20 rule”) applies to many things in life and trading is one of them. Many professional traders will tell you they make 80% of their annual profits through 20% of their annual trades. Therefore, it is important to lay low during the conditions are not favorable so that you are ready to profit from that 20% when the environment is ideal. Overtrading is very easy to do in an environment such as this one, but patient traders are always rewarded.

Today’s Watchlist:

GLD did not trigger and has been removed from the Watchlist. We are, however, still long PPH, SMH, and BBH.

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 = + 0.34, unrealized P/L = + $34

    PPH long (re-entry from June 27) –
    bought 73.55, stop 72.90, target 79.60, unrealized points = (0.42), unrealized P/L = ($42)

    SMH long (from June 1) –
    bought 34.82, stop 32.10, target 44.90, unrealized points = (1.03), unrealized P/L = ($309)


No changes to stops on open positions above. Remember the MTG Opening Gap Rules on any positions that gap open below their stops.

Edited by Deron Wagner,
MTG Founder and