The Wagner Daily | January 27, 2006

Commentary:

For the fourth consecutive day, the broad market meandered through the session in a choppy and indecisive manner, but this time the major indices finished near their intraday highs. Stocks closed with solid gains as well. Strength in the Semiconductor Index, which surged nearly 3% higher, helped the Nasdaq Composite to gain 1.0%. Both the S&P 500 and Dow Jones Industrial Average also kept pace, finishing higher by 0.7% and 0.9% respectively. After a nominal one-day correction, small and mid-cap stocks resumed their upward ascent and relative strength to the broad market. The Russell 2000 zoomed 1.7% higher and again closed at a new record high, while the S&P 400 advanced 1.1%.

Silver stocks, which we brought to your attention yesterday morning, were among yesterday’s biggest movers. PAAS rocketed 9% higher, SSRI 6%, and AEM 2%. Even better, all the gains resulted from intraday uptrends instead of opening gap ups. Kudos to subscribers who made their own “synthetic ETF” and profited from that sector. Since each of those stocks closed at multi-year highs and on many times average volume, a continuation of the breakout is likely in the short-term.

Not surprisingly, the price to volume relationship in the broad market maintained its recent see-saw pattern of bullish “accumulation days” and bearish “distribution days” yesterday. Despite higher volume losses that followed the previous day’s higher volume gains, overall volume levels increased once again. Total volume in the NYSE increased by 7%, while volume in the Nasdaq was 10% higher than the previous day’s level. Interestingly, yesterday’s Nasdaq volume marginally exceeded the January 20 level. In the NYSE, volume came in just a tad below that day’s level.

The erratic behavior of the broad market over the past week has caused us to shift our short-term bias to being positioned mostly in cash. Stocks followed up the broad-based, high volume selloff of January 20 with several days of consolidation near the lows of the range. Typically, this leads to further downward pressure and new lows. However, support of the closely-watched 50-day moving averages on the S&P and Nasdaq resulted in a tug-of-war between the bulls and bears. The S&P and Nasdaq finally bounced sharply off their 50-day MAs yesterday, but both indices are now in the middle of their ranges from the January 20 slide. When you combine this fact with the series of back to back “accumulation days” and “distribution days” the markets have had over the past week, attempting to predict the broad market’s short-term direction has become a daunting task. Guessing whether to be net long or net short the stock market may only result in getting “chopped up” and churning your account right now. Instead, we intend to sit on the sidelines a few days until some of the mixed signals vanish and the technical picture becomes more clear. It is important to realize that consistently profitable professional traders are often out of the markets more than they are in the markets.

Today’s Watchlist:

As per the commentary above, there are no new ETF 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):

unrealized P/L = + $111

RTH short (400 shares from Jan. 23 entry) –
shorted 94.76, stop 96.25, target 89.80, unrealized points = (0.89), unrealized P/L = ($356)

Closed positions (since last report):

net P/L = ($378)

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

$53,670

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