Commentary:

After gapping down on the open, stocks drifted lower throughout the morning, but mild buying interest lifted the market off its lows in the afternoon. Still, each of the main stock market indexes posted losses moderate losses. The Nasdaq Composite declined 0.8%, the S&P 500 0.5%, and the Dow Jones Industrial Average 0.3%. Relative weakness in the small-cap arena caused the Russell 2000 to fall 1.0%, while the S&P Midcap 400 slipped 0.8%. All the major indices finished just below the middle of their intraday ranges.

As expected, turnover continued to ease ahead of today’s FOMC statement on economic policy. Total volume in the NYSE declined 8%, as volume in the Nasdaq receded 3%. The lighter volume across the board prevented both the S&P and Nasdaq from registering a bearish “distribution day.” In the latter half of August, volume was lighter than average due to traders and investors taking their annual summer holidays. Then, throughout the first half of September, market participants seemed to have waited on the sidelines in anticipation of seeing the next move by the Fed. After today, there’s a pretty good chance that turnover will at least move back to average levels. The accompanying broad market direction that coincides with the higher turnover will probably determine the overall bias of stocks in the intermediate-term.

Over the past week, many financial websites have talked about nothing except the anticipation of today’s upcoming meeting of the Federal Reserve Board. As much as we wanted to avoid doing the same, the reality is that the market is definitely on hold right now. Momentum has dried up substantially in both directions, making it difficult to profitably trade just about anything. This is apparent when either trying to buy breakouts or sell short breakdowns below support. Considering the extremely light volume levels in the market, such lackluster action should not be surprising. The only logical plan of action that won’t lead to churning your account is to simply wait and see the market’s reaction to the 2:15 pm statement on economic policy.

There is often consensus among economists regarding the anticipated action of Fed meetings, but there is more uncertainty surrounding today’s. As such, expect the subsequent market reaction to be even more wild than usual. This volatility will be further compounded by the fact that both the S&P and Dow have been stuck to their pivotal 50-day MAs for the past three days. Considering the circumstances, it’s both senseless and pointless to even guess how the market will react today. Rather, we will merely trade what we see, not what we think. We’ll take an updated look at the major stock market indexes and leading sectors in tomorrow’s commentary. Stay alert and disciplined this afternoon!

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Today’s Watchlist:

OIH – Oil Service HOLDR
Long

Shares = 100
Trigger = 185.78 (over the high of the consolidation)
Stop = 180.83
Target = new high (will trail stop)
Dividend Date = n/a (individual stocks pay dividends)

Notes = We’ve been stalking this setup for a potential long entry over the past several days, but it has not yet triggered. Still, the setup continues to look good and remains on today’s watchlist.

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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):
SDS long (250 shares from September 13 re-entry) – bought 53.90, stop 53.18, target 62.89, unrealized points + 0.67, unrealized P/L + $168

IBB long (125 shares remaining from Aug. 31 and Sept. 7 entries) –

bought 79.62 (avg.), stop 78.89, target 83.30, unrealized points + 0.71, unrealized P/L + $89

LQD long (350 shares from August 31 entry) – (see notes below regarding dividend distributions)

bought 104.99 (avg.), stop 103.53, target 107.48, unrealized points + 0.10, unrealized P/L + $35

DXD long (300 shares from September 5 entry) – bought 51.42, stop 49.38, target 56.90, unrealized points (1.08), unrealized P/L ($324)

Closed positions (since last report):

(none)

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

$75,396

Notes:


No changes to the open positions. OIH still has not yet triggered, but we’ll give it another day on our watchlist. It closed weak yesterday, but that may be the typical shakeout that occurs before the breakout of consolidation. No harm in keeping it on the watchlist if it doesn’t trigger.

On September 4, LQD traded ex-dividend, with a dividend distribution of 49 cents per share. Unrealized points and P/L figures include this distribution, which will be paid out on September 10.

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Edited by Deron Wagner,
MTG Founder and
Head Trader