The Wagner Daily


A negative “knee-jerk” reaction from the quarterly earnings reports of both Intel and Yahoo! caused the broad market to open lower yesterday morning, but the bulls viewed the morning weakness as a buying opportunity. The Nasdaq Composite was showing a 0.7% loss when the market opened, but it quickly found support and rallied throughout the day. By the closing bell, the bullish reversal had turned the Nasdaq’s early 0.7% loss into a 0.7% gain and a new 4-year closing high. Both the S&P 500 and Dow Jones Industrials also showed bullish reversals, as the indices closed higher by 0.5% and 0.4% respectively. The Russell 2000 Small-Cap Index handily rallied 1.3%, while the S&P 400 Mid-Cap Index tacked on another 0.6%. Both indices once again closed at record highs.

Post-earnings strength from Amgen helped the Biotech Index ($BTK) to register a whopping 4.2% gain. Although we closed BBH (Biotech HOLDR) for a 15-point profit several days ago, we remain long CELG (with a 9.2% unrealized gain), which was called as an MTG Stalk Sheet long entry on July 16. In the tech arena, the Semiconductor Index ($SOX) recovered from an early 1.8% loss and rallied to a 1.7% gain, despite weakness in Intel! In addition to the strength in SMH, our long position in FXI (Xinhua 25 China Fund) also set a new all-time closing high.

Confirming the breakout to a new four-year high was a surge in Nasdaq turnover yesterday. Total volume in the Nasdaq increased by 19% over the previous day’s level and was the highest of any day since June 24. Volume in the NYSE, however, declined by 1%. Regardless, the pattern of higher volume on a majority of the “up” days and lighter volume on the (rare) “down” days throughout the past two weeks continues to confirm a healthy overall market.

Yesterday’s closing price of 2,188 put the Nasdaq Composite ten points above its prior closing high of 2,178 that was set on December 30. It also means the Nasdaq set a new four-year closing high. However, the index is still several points below the intraday high of 2,191 that was set on January 3, 2005. The S&P 500 Index, on the other hand, is in clear territory of a new four-year high with no overhead supply to contend with. The Dow Jones Industrial Average continues to lag the other indices and should be avoided for long positions unless daytrading. The chart of the Nasdaq below illustrates resistance of the prior intraday high of 2,191:

Because of this pivotal resistance point in the Nasdaq, short-term traders may consider either selling their winning long positions or at least tightening their stops. Odds are good that the Nasdaq will at least pause a few days or longer at this current level. If it doesn’t, we could see a momentum explosion to the upside. Whether or not to sell winning long positions into strength at current levels is a personal decision that is dependent on your risk tolerance, but one thing for certain is that new long positions should be approached cautiously. The Nasdaq has become quite extended away from its 20-day moving average, so a short-term correction would not surprise us. But as we mentioned in yesterday’s newsletter, the intermediate-term bias on the broad market remains bullish.

The earnings reports are flying, so expect continued market volatility throughout the next one to two weeks. As such, use caution entering any new positions today. Check the free Yahoo! Finance earnings calendar to check earnings dates of any companies.

Today’s Watchlist:

There are no new plays for today, as we now have three open positions (SMH and FXI long, UTH 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
. Net P/L figures are based on the quantity of shares represented
in the MTG
Position Sizing Model

Closed Positions:


Open Positions:

    SMH long (from June 1) –
    bought 34.82, stop 34.60, first target 38.85, then 44.90, unrealized points = + 2.89, unrealized P/L = + $867

    FXI long (from July 14) –
    bought 57.95, new stop 56.80, target (new highs, will trail stop), unrealized points = + 0.64, unrealized P/L = + $192

    UTH short (from July 20) –
    short 112.67, stop 114.70, target 108.05, unrealized points = (1.23), unrealized P/L = ($123)


We have raised the stop on FXI. UTH short also triggered yesterday.

Edited by Deron Wagner,
MTG Founder and
Head Trader