Commentary:
Stocks snapped their three-day losing streak yesterday, but the session’s price action was rather unconvincing. The main stock market indexes grinded their way higher in the morning, then backed off in the afternoon. The Nasdaq Composite gained 0.8%, the S&P 500 0.6%, and the Dow Jones Industrial Average 0.4%. The small-cap Russell 2000 and S&P Midcap 400 advanced 0.7% and 0.9% respectively. The major indices finished just above the middle of their intraday ranges.
Total volume in the NYSE increased 8% above the previous day’s level, but turnover in the Nasdaq was 3% lighter. Although the S&P 500 scored a bullish “accumulation day” by rallying on higher volume, trading remained below its 50-day average level for the past six days. Curiously, Nasdaq volume was the lightest of the year for the second day in a row. Market internals were not overly impressive. Advancing volume in the NYSE exceeded declining volume by just 2 to 1. The Nasdaq ratio was positive by 5 to 2.
In yesterday’s commentary, we pointed out the bullish chart patterns in both the Steel and Basic Materials sectors. Another industry that has come across our radar for potential long entry is Biotech. Specifically, the Biotech HOLDR (BBH) may soon be ready to break out above a one-month band of sideways consolidation. Other Biotech ETFs are also perking up, but BBH is actually showing the most relative strength for a change. Its daily chart is shown below:
Because yesterday’s price action was a bit shaky, we trailed a tight intraday stop on our long position in the ProShares Ultra QQQ (QLD). Our new stop subsequently got hit in the afternoon, enabling us to lock in a gain of nearly 3 points since our March 18 entry. QLD closed approximately 50 cents below our exit price, but the daily chart still shows the potential for upside momentum if it rallies above yesterday’s high. This would enable QLD to move back above its 50-day MA. We’re fully prepared to re-enter the position if that occurs, and at nearly the same price we sold. Below is a daily chart of QLD:
Yesterday’s reversal attempt came just in a nick of time. Had the major indices sold off for one more day, they would have been in danger of falling below their 61.8% Fibonacci retracement levels from their March 17 lows to March 24/25 highs. Instead, the broad market now has a chance to resume its short-term uptrend that began in mid-March. Nevertheless, the major indices need to quickly follow through on yesterday’s gains by advancing significantly within the next day or two. If stocks fail to find their “mojo” and hang out at current levels too long, the overhead supply of the primary, long-term downtrends will tip the balance of power back to the bears.
Today’s Watchlist:
There are no new setups in the pre-market today, though we are monitoring SLX and XLB for potential long entries if they breakout. We’re also watching QLD for a possible re-entry over yesterday’s high, depending on how well the pre-market gap holds up in the morning. We’ll send an Intraday Trade Alert if/when we buy any of them.
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:
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Open positions (coming into today):
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INP long (200 shares from March 24 entry) – bought 66.26, stop 62.71, target 75.70, unrealized points = + 0.39, unrealized P/L = + $78
IYT long (250 shares from March 25 entry) – bought 86.69, stop 83.63, target 92.30, unrealized points = (1.22), unrealized P/L = ($305)
EWT long (700 shares from March 26 entry) – bought 16.60, stop 15.59, target new high (will trail stop), unrealized points = (0.75), unrealized P/L = ($525)
Closed positions (since last report):
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QLD long (200 shares from March 18 entry) – bought 67.70, sold 70.52, points = + 2.82, net P/L = + $560
Current equity exposure ($100,000 max. buying power):
- $45,636
Notes:
Per intraday e-mail alert, we sold QLD yesterday afternoon. We locked in the gain due to unconvincing price action, but we’ll be watching for a potential re-entry over yesterday’s high, depending on how the pre-market gap action plays out. No changes to remaining three open positions.
Edited by Deron Wagner,
MTG Founder and
Head Trader