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The Wagner Daily


Commentary:

A plethora of market-moving news and rumors fueled whipsaw action that saw the major indices break out above their previous day’s highs, sell-off below their prior day’s lows, then recover to close near the middle of their intraday ranges. When the dust finally settled, most of the main stock market indexes had closed modestly higher. The Nasdaq Composite, up 1.5% at its intraday peak, and down by the same percentage at its intraday trough, finished nearly in parity. The tech-heavy index eked out a 0.1% gain. Both the S&P 500 and Dow Jones Industrial Average advanced 0.4%. The small-cap Russell 2000 and S&P Midcap 400 indices each slipped 0.1%. Though the trading days preceding holiday periods are often uneventful, yesterday’s session was anything but boring!

Yesterday’s wild volatility undoubtedly triggered many stops in both the bull and bear camps, spurring a rise in turnover. Total volume in the NYSE increased 11%, while volume in the Nasdaq zoomed 21% above the previous day’s level. Technically, the higher volume gains in the S&P 500 and Nasdaq Composite caused both indexes to register a bullish “accumulation day.” But considering the indecisive intraday price action, it would be misleading to declare yesterday’s session as being driven by institutional buying. Further, market internals failed to even settle in positive territory. In both the NYSE and Nasdaq, declining volume fractionally exceeded advancing volume.

Two days ago, we said that the Market Vectors Gold Miners (GDX) was poised to end its short-term correction and resume its primary uptrend. After a one day “shakeout” below the 50-day MA, it popped above its two-week downtrend line and closed at its intraday high yesterday. Convergence of the 10 and 20-day MAs is just overhead, but a rally above yesterday’s high could send GDX back to test its prior high over the next several weeks. The breakout above the downtrend line is illustrated on the daily chart below:

In addition to GDX, the StreetTRACKS Gold Trust (GLD) also cruised higher yesterday. GLD has a similar chart pattern to GDX, except that it has shown more relative strength by holding above its 50-day MA the whole time. Sometimes the individual mining stocks of GDX trade differently than the spot gold commodity of GLD, but it appears that both are trading in similar fashion right now.

Following up on our technical look at the major indices, two notable events happened yesterday. The laggard Russell 2000 Index, which set a new 52-week closing low the previous day, bounced off support of its prior intraday low from August. It’s too early to tell whether or not key support of this prior low is likely to hold, but the test of such an important support level should at least generate a decent bounce in the short-term. As the small-cap index was previously weighing on the major indices, a stabilization of price in the Russell could help the S&P, Nasdaq, and Dow as well. The bounce off of the intraday low of August is annotated below:

The 200-day MA of the Nasdaq Composite was violated on an intraday basis yesterday, but it’s positive that the index recovered to close above it. Intraday probes below major support levels have the effect of washing out the “weak hands” by triggering their stops at obvious support levels. “Stop hunts” such as these absorb overhead supply, which is often necessary in order for markets to recover and move higher. Therefore, one could actually view yesterday’s dip below the 200-day MA as bullish because the Nasdaq managed to close back above it:

Although the probe below the prior low could be construed as beneficial for the market, all bets are off if the Nasdaq subsequently closes below its 200-day MA in today’s session. Therefore, it is unwise to blindly begin buying stocks and ETFs in the Nasdaq just because of yesterday’s price action. Rather, wait for additional confirmation of a market reversal, such as a close above yesterday’s high. That would also put the Nasdaq back above its 10-day MA for the first time in two weeks.

NOTE: The U.S. markets will be closed on Thursday, November 22 for the Thanksgiving Day holiday, and will close at 1:00 pm ET on Friday. As such, The Wagner Daily will not be published on Thursday, but regular publication will resume with a brief edition on Friday. Enjoy the holiday with your family and friends!


Today’s Watchlist:

There are no new pre-market setups today. Given yesterday’s market action, it’s nice to be mostly in cash right now. We’ll re-assess the market for potential trade setups after the holiday week has passed.


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):

      IDU long (300 shares from November 19 entry) – bought 101.09, stop 99.21, target new high (will trail stop), unrealized points + 0.70, unrealized P/L + $210

    Closed positions (since last report):

      (none)

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

      $30,537

    Notes:


      No changes to our sole open position. Showing clear relative strength, IDU remained in the positive even when the market dropped in the afternoon.

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Edited by Deron Wagner,
MTG Founder and
Head Trader

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