Stocks began the week in an uneventful fashion, as the major indices traded in a narrow and sideways range throughout the entire session before finishing near unchanged levels. The S&P 500 and Nasdaq Composite both declined 0.1%, while the Dow Jones Industrials inched 0.1% higher. The S&P Midcap 400 Index was unchanged, but small cap stocks showed relative weakness, causing the Russell 2000 Index to lose 0.3%. Although the intraday action was lethargic, a quiet day of consolidation after the market’s recent gains is a bullish sign. Conversely, nearly every rally throughout September and October was instantly met by selling that promptly erased the gains.
Turnover in yesterday’s session was mixed. Total volume in the NYSE rose by 14%, but volume in the Nasdaq was 2% lighter than the previous day’s level. Because the S&P closed lower and on higher volume, the index technically had a bearish “distribution day” yesterday. However, it’s difficult to classify a narrow-range day with a 0.1% loss as institutional selling, especially given that the Dow actually closed fractionally positive. The Nasdaq and small cap Russell declined on lighter volume yesterday, which is a positive sign as well. Declining volume marginally exceeded advancing volume in the NYSE, but it was the opposite scenario in the Nasdaq.
Because the major indices closed near the flat line yesterday, the key short-term support and resistance levels did not really change. The Dow has rallied up to resistance of its prior highs from July and August of this year, so keep a close eye on that level in the coming days. The red horizontal line on the weekly chart below illustrates the resistance:
If the Dow can firmly close above the horizontal price resistance over the 10,720 level, it will present an opportunity for long entry in DIA (Dow Jones Industrials). However, we do not recommend buying the first breakout because the Dow is more likely to break out above that resistance level, then correct down to or just below the breakout level. The retracement provides the lower risk entry point than buying the breakout in this case.
The Nasdaq 100 Index (and QQQQ) is sitting at a 52-week high and trading sideways. This, of course, is bullish and should pull the rest of the broad market with it. The S&P 500 is holding up well, but is not “out of the woods” yet. The August 3 closing high of 1,245 is a major resistance level that could provide a convenient excuse for a correction in the broad market. We’ll take a more detailed look at individual industry sectors and the broad market when the technical picture changes. For now, we like Biotechs, Semiconductors, Financials, and Gold sectors long. We are long BBH (half a position) and GLD.
There are no new setups for today.
Daily Performance 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):
BBH long (75 shares remaining from Nov. 3 entry) –
bought 197.30, stop 205.90, target new high (will trail stop), unrealized points = + 9.30, unrealized P/L = + $697
GLD long (700 shares from Nov. 11 entry) –
bought 46.79, stop 45.70, target new high (will trail stop), unrealized points = (0.17), unrealized P/L = ($119)
Closed positions (since last report):
Current equity exposure ($100,000 max. buying power):
Note the new, very tight stop on the remaining shares of BBH. We think BBH still looks good long, but is due for a small correction here. Better to lock in the gains and look for re-entry if/when it does.
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