Commentary:
After beginning the day lower, stocks reversed to move into positive territory by mid-day, but afternoon weakness caused most of the major indices to post moderate losses. Both the S&P 500 and Dow Jones Industrial Average fell 0.4%. The small-cap Russell 2000 and S&P Midcap 400 indices each slipped 0.5%. Aided by relative strength in the large-cap tech arena, the Nasdaq Composite eked out a gain of 0.1%. All of the main stock market indexes settled just below the middle of their intraday ranges, indicating indecision into the close.
Total volume in the NYSE was 4% below the previous day’s level, enabling the S&P to avert a “distribution day.” Turnover in the Nasdaq ticked 3% higher, but the minimal 0.1% gain in the index was not enough for the index to score a bullish “accumulation day” that would have pointed to institutional buying. In both exchanges, volume has come in below 50-day average levels for the past nine consecutive sessions. When traders begin returning to their desks after Monday’s Labor Day holiday, trading should begin to pick up. The big question, however, is which direction will mutual funds, hedge funds, and other institutions lay on the volume when they return?
Today, Federal Reserve Chairman Ben Bernanke is scheduled to speak about housing and the economy when it kicks off its annual retreat in Wyoming at 10 am ET. The opening comments from this event are always closely watched by market participants, and this will be the case even more so this year. With both the S&P 500 and Nasdaq Composite testing pivotal resistance of their intermediate-term downtrends, the reaction to today’s comments could be the determining factor as to the stock market’s overall bias in September. Obviously, it’s impossible to know how the market will react, no matter what Bernanke says. The only thing we can say with a reasonable amount of certainty is that trading is likely to be whippy and more erratic than usual today. Consider letting the market digest the morning comments and taking it easy with new positions ahead of the three-day holiday weekend. Right now, specific industry sector ETFs with relative strength or weakness are a safer bet than new entries in the ETFs that mirror broad-based indexes such as the S&P or Nasdaq.
Today’s Watchlist:
OIH – Oil Service HOLDR
Long
Shares = 100
Trigger = 177.41 (above yesterday’s high)
Stop = 172.28 (below hourly uptrend line)
Target = 189.90 (just below resistance of 52-week high)
Dividend Date = n/a (individual stocks pay out sporadically)
Notes = See commentary above for explanation of the setup.
IBB – iShares Nasdaq Biotech
Long
Shares = 250
Trigger = 79.19 (above weekly downtrend line and 200-day MA)
Stop = 77.28 (below 20-day and 50-day MAs)
Target = 83.30 (just below resistance of 52-week high)
Dividend Date = December 2007
Notes = See commentary above for explanation of the setup.
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):
-
TLT long (300 shares from August 24 entry) – bought 88.02, stop 86.61, target 90.89, unrealized points + 0.79, unrealized P/L + $237
DXD long (250 shares total – half from Aug. 22, half from Aug. 23) – bought 52.07 (avg.), stop 50.87, target 57.90, unrealized points (0.49), unrealized P/L ($123)
Closed positions (since last report):
-
(none)
Current equity exposure ($100,000 max. buying power):
- $39,538
Notes:
No changes to the open positions above. However, remember to use the MTG Opening Gap Rules if DXD gaps open below its stop price. OIH and IBB did not yet trigger, but remain on our watchlist going into today.
Edited by Deron Wagner,
MTG Founder and
Head Trader