The Wagner Daily


A late morning rally attempt fizzled out yesterday morning, but stocks showed resiliency in the afternoon and closed within their previous day’s trading ranges. The mixed session resulted in the Nasdaq correcting by 0.4%, but the S&P 500 held on to 0.1% of its 0.6% morning gain. The Dow Jones Industrials showed relative strength and closed with a 0.6% gain, but the small-cap Russell 2000 took a breather and gave back 0.5%. The S&P Midcap 400 was unchanged.

Total volume in the both the NYSE and Nasdaq declined by 2% yesterday, preventing the Nasdaq from registering a bearish “distribution day.” Nevertheless, it was still nice to see that NYSE volume came in above its 50-day average level for the third consecutive day. It was the first time in six weeks that this has occurred. Market internals matched the performance of the major indices. In the NYSE, advancing volume marginally exceeded declining, but the opposite happened in the Nasdaq. This, of course, confirms the price action of the S&P closing higher, but the Nasdaq closing lower. Occasionally, market internals are contrary to the price action in the major indices. When this occurs, it tells us there is “more than meets the eye” under the surface.

Like the broad market, industry sector performance was quite mixed as well. Internet, Biotech, and Computer Networking stocks all weighed on the Nasdaq, while Pharmaceutical, Healthcare, and Utilities sectors helped to prop up the S&P. The real mover yesterday was the Gold Index ($GOX), but this time to the downside. As anticipated, traders and investors swiftly took profits from recent strength in the $GOX, causing the index to plummet 6.6%! Although the long-term charts of the $GOX and GLD remain extremely bullish, we hope that subscribers who were long followed our advice in yesterday morning’s newsletter to tighten their stops on gold-related shares. Those who did should have been able to exit near the top of the run because most of the losses occurred intraday as opposed to gapping sharply lower on the open.

Taking an updated look at the broad market, we are pleased that stocks have, so far, retained their gains from Tuesday’s breakout. This is a welcome change from the numerous failed breakouts and failed breakdowns the major indices have experienced over the past two months. Given the barrage of earnings on tap, there is obviously no guarantee that stocks won’t fall right back down to where they were before the big rally, but it’s just nice to see the market consolidate after a big move instead of immediately reversing the next day. The only thing that remains a bit of a concern is resistance of the prior highs in the S&P, Nasdaq, and Dow. All three indices broke out above those prior highs and briefly traded at new five-year highs yesterday morning, but traders quickly moved in and sold into strength. This caused both the S&P and Nasdaq to finish just below their prior intraday highs, while the Dow managed to close just above its prior high. Beginning with the Nasdaq Composite, notice how it stalled and reversed right at the 2,375 level yesterday. As the chart below illustrates, 2,375 was the exact intraday high from April 7 as well. This level, of course, should be closely watched in the coming days because it provides a convenient excuse for sellers to enter the market:

The S&P 500 probed above its April 6 high of 1,314 on an intraday basis, but fell back into the upper end of its previous trading range. 1,310 is the magic number we have been discussing over the past week and the S&P closed just one point above that yesterday. If it holds above 1,310, then we will most likely see a close above the April 6 high within the next day or two, but it would be negative if the index falls back below horizontal price resistance at 1,310:

Finally, the Dow finished just above its prior intraday high from March 21, but near the middle of yesterday’s trading range:

As for the small and mid-cap indices, they remain the place to be if you’re long the broad-based ETFs. Both the Russell 2000 and S&P 400 are consolidating at their all-time highs and are holding above their prior highs from March. Because these indices have the least amount of overhead supply (virtually none), we can expect them to continue leading the broad market on the “up” days. The ETFs we trade that track these two indices are IWM (iShares Russell 2000) and MDY (S&P Midcap SPDR).

The largest factor that has the power to move the market right now is quarterly earnings season, which is presently in full swing. So far, the reaction to the major earnings reports has been pretty positive. IBM, Motorola, and eBay were among the few companies whose stocks sold off after their earnings announcements, but most of the big names who have reported so far have rallied post-earnings. Google, who reported a strong quarter after yesterday’s close, was last seen trading more than 7% higher in the after-hours session. Like we said yesterday, our overall bias right now is one of keeping your right hand pressed lightly on the buy button, while simultaneously having your left hand lightly resting on the “emergency brakes.” Above all, remember to trade what you see, not what you think!

Today’s Watchlist:

EWW – iShares Mexico Index

Trigger = HALF at 39.62, HALF at 39.77
Target = new high (will trail a stop)
Stop = 36.95 (below April 13 low)
Shares = 300

Notes = EWW has been consolidating in a sideways range, at multi-year highs, for nearly four months and is now poised to finally break out of the range. Notice that we will be “scaling in” to this position. We will buy half of the position above 39.62 and the remaining shares over 39.77. This reduces our risk exposure by forcing the trade to confirm its breakout before getting too large of a position. This trade may not trigger for a few days or longer, but we will begin stalking it, just in case it goes.

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):


    Closed positions (since last report):


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



      EWW did not yet trigger, but remains on today’s watchlist because we still like the setup and with the same trigger prices for entry.

    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