Commentary:
Stocks consolidated in a narrow, sideways range yesterday before finishing slightly higher. The Nasdaq led the way with a 0.3% gain, the Dow Jones Industrial Average advanced 0.2%, and the S&P 500 closed 0.1% higher. The S&P Midcap 400 gained 0.1%, but relative weakness in small-cap stocks caused the Russell 2000 to lose 0.1%. It was a relatively uneventful day overall, as the S&P 500 oscillated in an intraday trading range of only five points.
Total volume in the NYSE was 12% lower than the previous day’s level, while volume in the Nasdaq declined by 10%. When the market moves in a sideways range following a day of solid gains, it’s common for volume to recede as stocks digests their gains. Some traders and investors were also undoubtedly waiting until the passing of the holiday weekend before making big bets on either side of the market. Advancing volume in the Nasdaq exceeded declining volume by a ratio of just under 2 to 1, but the NYSE ratio was only fractionally positive.
A rise in the price of spot gold enabled the StreetTRACKS Gold Trust (GLD) to break out above its recent consolidation yesterday. GLD tested support of its 50-day moving average two times over the past week, but it promptly reversed higher both times. The dips below the 50-day MA helped wash out the “weak hands,” which made it easier for GLD to break out yesterday. From here, GLD is poised to rally at least to its prior high from late February. We remain long from our March 28 entry. The breakout is illustrated on the daily chart below:
GLD has been trading above its 50-day MA since the middle of March, but with the exception of a one day pop on March 22, the iShares Silver Trust (SLV) has been below its 50-MA. This changed yesterday. Yesterday’s 1.8% gain finally pushed SLV back above its 50-MA. SLV has more overhead supply than GLD because it is further off its high, but it should see a short-term momentum burst now that it has moved above that pivotal resistance level:
While on the subject of commodity ETFs, we should point out that the U.S. Oil Fund (USO) is setting up for a low-risk buy entry. Last week, we noted the breakout of USO above a multi-month band of sideways consolidation. Rather than buying the initial breakout, we were waiting for a subsequent pullback to test that pivotal support level. That occurred yesterday, and it held up well. If it moves above yesterday’s high in today’s session, we plan to buy in anticipation of a resumption of the breakout. Notice how it perfectly bounced off support of the breakout level yesterday:
As for the major indices, nothing has changed on a technical basis since our analysis in yesterday’s newsletter. The S&P 500, Nasdaq, and Dow Jones each closed right at key resistance of their prior highs from March. Traders and investors surely have a lot of stops near the current levels, the eventual triggering of which will result in a high-momentum move in either direction. In turn, bulls or bears could be drawn into the frenzy, depending on the direction of the momentum. However, continued light trade ahead of the three-day holiday weekend would mean we probably need to wait until next week before seeing any definite resolution of the market’s next move.
NOTE: The U.S. equities markets will be closed this Friday, April 6, in observance of the Good Friday holiday. As such, The Wagner Daily will not be published that day. Regular publication will resume on Monday, April 9. Enjoy the extended holiday weekend!
Today’s Watchlist:
USO – U.S. Oil Fund
Long
Shares = 450
Trigger = 52.72 (above yesterday’s high)
Stop = 50.89 (below the breakout level and 20-day EMA)
Target = 56.40 (200-day MA resistance)
Dividend Date = n/a
Notes = Per the above commentary, we are looking to buy USO over yesterday’s high. It successfully tested and held support of its breakout level, so a rally above yesterday’s high should result in a resumption of the uptrend.
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 long (400 shares from March 28 entry) – bought 66.15, stop 64.18, target new high (will trail stop), unrealized points = + 0.66, unrealized P/L = + $264
IYR short (275 shares from March 13 entry) – sold short 85.75, stop 88.69, target 78.30, unrealized points = (0.68), unrealized P/L = ($187)
DXD long (350 shares from March 27 entry) – bought 58.30, stop 56.78, target 63.10, unrealized points = (1.12), unrealized P/L = ($392)
Closed positions (since last report):
-
(none)
Current equity exposure ($100,000 max. buying power):
- $70,505
Notes:
No changes to the open positions above.
Edited by Deron Wagner,
MTG Founder and
Head Trader