The Wagner Daily | September 16, 2005

Commentary:

Stocks gapped up and began the day on a positive note, but the enthusiasm quickly faded, as the broad market drifted lower in the morning. The major indices spent the rest of the day trading sideways in a narrow range. Both the S&P 500 and S&P 400 Midcap indices finished the day unchanged, the Dow Jones gained 0.1%, and both the Nasdaq Composite and Russell 2000 lost 0.l%. Individual sector performance was quite mixed, with about half the industries finishing on either side of unchanged. Total volume in the NYSE increased by 7% yesterday, while volume in the Nasdaq came in 1% higher than the previous day’s level. Although turnover was higher, yesterday was not really a day of either accumulation, nor distribution because the indices closed virtually unchanged.

The Gold Index ($GOX), which we discussed extensively yesterday, cruised another 1.5% higher. GLD (and spot gold) marched 1.1% higher as well. Other strong sectors were the Utilities ($DJU) and Biotechs ($BTK), each of which gained 1.0%. On the downside, the bankruptcies of Delta and Northwest airlines weighed down the Airline Index ($XAL) to a 2.9% loss. The Semiconductor Index ($SOX) lost 1% and has now given back all of its gains from September.

The $SOX index, which acted great during its bullish consolidation in August, attempted to break out in the beginning of September, but has since drifted back down to its breakout point. The losses of the past two days put the $SOX back down in its prior trading range from last month. However, the index is now right above its primary uptrend line that began with the low of April 29, 2005. Support of this uptrend line is illustrated in blue on the weekly chart of the $SOX below:

Also of note is that SMH (Semiconductor HOLDR) closed right on support of its 20 and 50-day MA convergence:

Because the $SOX is so heavily weighted, the Nasdaq often follows the $SOX. Therefore, keep a watchful eye on whether or not the $SOX holds support of that trendline, as it is likely to determine the direction of the Nasdaq as well. The Biotechs have also been showing relative strength lately, so they need to hold as well. If the leading sectors start to drop, the broad market surely will too. But if not, both BBH (Biotech) and SMH may offer good opportunities for re-entry when/if the market turns back up.

Yesterday, we looked at daily charts of the major indices and analyzed how each of the them closed Wednesday near’s pivotal levels. However, since the broad market was virtually unchanged yesterday, those same key support levels remain going into today. The S&P 500 probed below its 50-day MA on an intraday basis, but again closed a few points above it. The Dow did the same thing by running stops below the 200-day moving average, but bouncing to close just above it. The Nasdaq, however, remained below its 50-day MA and also broke below its 20-day MA yesterday. It is looking more and more like the Nasdaq will soon test its August low. You may want to review our technical analysis in yesterday’s Wagner Daily and make note of the levels we visually highlighted. We are bound to see a big move in either direction depending on whether or not the S&P and Dow hold support of their 50 and 200-day moving averages respectively.

Today’s Watchlist:

There are no new trade setups for today, as we are now near our max. exposure based on the $50,000 cash position model.

Daily Reality Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below:

Open positions (coming into today):

stop 44.05

unrealized P/L = + $664

IYR short (400 shares from Sept. 13) –
shorted 65.77, stop 67.30, target 61.10, unrealized points = (0.08), unrealized P/L = ($32)

PPH long (300 shares from Sept. 13) –
bought 72.78, stop 71.20, target 77.80, unrealized points = (0.82), unrealized P/L = ($246)

Closed positions (since last report):

Current equity exposure ($100,000 max. buying power):

$84,222

Notes:

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here for glossary and explanation of terms used in The Wagner Daily

Click here to view MTG’s past performance results (updated monthly).

Edited by Deron Wagner,
MTG Founder and
Head Trader