The Wagner Daily


After beginning the day with an opening gap up, stocks trended higher throughout the morning session, but the bears once again showed up in the afternoon and caused the broad market to give back most of its earlier gains. The major indices each finished in the bottom third of their intraday ranges, but closed in positive territory nevertheless. The S&P 500 and Dow Jones Industrials each gained 0.3%, while the Nasdaq Composite advanced 0.4%. The small-cap Russell 2000 Index rebounded 1.0% from its 2.6% loss that had accumulated in the four days prior. The mid-cap S&P 400, which had also been displaying relative weakness, bounced 0.7%.

Total volume in the NYSE rose by 5% yesterday, but turnover in the Nasdaq was 4% lighter than the previous day’s level. This means that the S&P technically registered a bullish “accumulation day” because the index closed higher and on higher volume. However, it was not positive that it finished near its intraday low. Overall volume in both exchanges has come in below 50-day average levels in each of the past three sessions and is likely to continue declining until after the New Year’s Day holiday. With lower turnover comes thin markets. Thin markets, in turn, usually lead to erratic and choppy moves within the major indices. This is one of the reasons we have been recommending you take it easy with entering new positions until after the holidays have passed.

Major industry sectors that turned in the strongest performances yesterday were: Gold + 2.6%, Transportation + 2.3%, and Biotechnology + 1.9%. On the downside, Utilities fell 1.2% and the Semiconductors lost 0.3%. Most of the other industries we follow posted minor gains. As most of you know, we netted solid profits from strength in both the Gold ETF (GLD) and the Gold mining stocks ($GOX) from mid-November through the beginning of December, at which point we sold into strength in anticipation of a correction. Since peaking on December 12, we have been stalking both GLD and several individual mining stocks for potential re-entry on the long side. So far, the $GOX sector has been acting well by consolidating in a narrow, sideways range near its highs. As the chart below illustrates, yesterday’s gain in the $GOX was prompted by the index coming into support of its 20-day moving average. It also is holding above its primary daily uptrend line:

If the $GOX trades sideways for another week or two instead of rapidly breaking out to a new high, it would be rather bullish in the big picture. Such price action would enable a more solid base of support to be formed. A lack of overhead supply would subsequently make it easy for the $GOX to break out. However, because the market is likely to become thin until the holidays have passed, we are skeptical about trusting a breakout to new highs in the $GOX, or any other index, during the next week and a half. Still, it is wise to have a watchlist of strong sectors so that you immediately know which ETFs and stocks to consider buying after the holidays have passed. Gold is definitely one such sector that should be on your watchlist because the $GOX index is consolidating near its all-time high. As discussed in yesterday’s newsletter, the Pharmaceutical Index (and PPH) should also be on your long watchlist.

The closely-watched Semiconductor Index ($SOX) is holding at a pivotal level that will determine its direction over the next several weeks. Take a look:

As the blue horizontal line illustrates, the $SOX is holding above support of its prior highs from September and November, but it has also begun to consolidate near the low of its three-week trading range and is below its prior uptrend line. This means the sector is showing us mixed signals and could easily snap in either direction. Therefore, we recommend avoiding this sector until the technical picture becomes more clear. Remember also that the Nasdaq tends to follow the $SOX. As such, an indecisive and choppy $SOX could lead to the Nasdaq behaving in a similar manner.

As always, we will be providing the usual technical analysis and market commentary during the holiday period, but entering new positions at this time is not advisable. Overtrading is easy to do in a light volume environment, and it only leads to churning your trading account. If you are currently flat, relax and take some time off. The market will certainly be here when you are ready to return, and remaining in cash during this time period is likely to save you money. If, however, you are already in positions that you like, simply set your good-til-canceled (GTC) stop orders and cruise into the end of the year as well.

Note that the U.S. equities markets will be closed on Monday, December 26. As such, The Wagner Daily will not be published that day, but regular publication will resume on December 27. Happy Holidays to you and your family!

Today’s Watchlist:

Per the commentary above, we do not plan to enter any new positions between now and Christmas Day. We will, however, send an e-mail alert if something really grabs our attention.

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):

      IWM short (300 shares from Dec. 19 entry) –
      shorted 67.57, stop 68.90, target 64.25, unrealized points = (0.22), unrealized P/L = ($66)

    Closed positions (since last report):


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



      We remain short IWM with the same stop.

    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