Indecision among traders caused the major indices to seesaw between positive and negative territory before finishing yesterday’s session fractionally higher. The S&P 500, Nasdaq Composite, and S&P Midcap 400 indices all managed to gain 0.1%, but the Dow Jones Industrial Average was unchanged. The small-cap Russell 2000 rallied 0.3%. Stocks were at their best levels late in the morning, showed losses in the early afternoon, then recovered off their lows to close in the middle of their intraday ranges.
Total volume in the NYSE increased by 10%, while volume in the Nasdaq was 18% higher than the previous day’s level. The market’s gains on higher volume technically caused an “accumulation day” to register for both the S&P and Nasdaq. However, with such nominal gains and intraday indecision, the session certainly did not have the feel of institutional buying. Despite the rise in turnover, volume in both exchanges still came in below average levels, just as it has done nearly every day this month. Advancing volume exceeded declining volume in both the NYSE and Nasdaq, but not by a wide margin.
For the past four days, the broad market has been consolidating in a choppy, sideways range. Below, we have illustrated these ranges on the hourly charts of both the S&P 500 and Nasdaq Composite:
Because the broad market is consolidating near the high of last week’s rally, odds technically favor an upward break out of the range and a resumption of that short-term uptrend. However, remember that the intermediate-term picture is still pretty negative, so we could just as easily see a resumption of the primary downtrend. Unfortunately, we may not see conviction in either direction until traders return from their summer vacations and volume reverts back to normal levels.
Until the S&P or Nasdaq breaks out of the ranges shown above, your best play is to enter SOH (sitting on hands) mode. It’s really easy to overtrade in a range-bound market, but the most likely outcome is that you will merely churn your account and grind away any profits you may have recently obtained. Conversely, sitting patiently on the sidelines enables you to not only preserve capital, but be in a position to quickly take advantage of either an upside or downside move out of the range. If the market breaks out to the upside, be prepared to buy the sectors with relative strength such as Semiconductors or Telecom. If the major indices roll over, Financials, Oil, and even the broad-based ETFs are among the good short sale candidates.
Due to choppy market conditions, there are no new setups in the pre-market today. The DXD setup that we alerted you of via e-mail did not trigger and has, for now, been removed from the watchlist.
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):
GLD short (250 shares from August 18 entry) –
sold short 60.83, stop 62.42, target 55.20, unrealized points = (1.22), unrealized P/L = ($305)
IWM short (250 shares from August 1 entry) –
sold short 68.65, stop 71.16, target 61.70, unrealized points = (1.76), unrealized P/L = ($440)
Closed positions (since last report):
Current equity exposure ($100,000 max. buying power):
Per intraday e-mail alert, we lowered the stop on GLD yesterday. We also sent an alert that we were stalking DXD for potential long entry, but it did not trigger yet.
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Click here to view MTG’s past performance results (updated monthly).
Edited by Deron Wagner,
MTG Founder and