Commentary:
After two days of high volatility, stocks chopped around in a sideways range yesterday before finishing modestly higher. The Nasdaq Composite bounced 0.5%, as both the S&P 500 and Dow Jones Industrial Average gained 0.4%. The small-cap Russell 2000 advanced 0.5% and the S&P Midcap 400 rose 0.8%. The major indices closed just above the middle of the day’s directionless trading ranges.
Lower volume gains followed Wednesday’s session of higher volume losses. Total volume in the NYSE eased 4%, while turnover in the Nasdaq was 11% lighter than the previous day’s level. Market internals in the NYSE were nearly flat, with advancing volume fractionally exceeding declining volume. The Nasdaq adv/dec volume ratio was positive by a ratio of just over 3 to 2.
In the realm of international ETFs, some of the more popular regions right now include countries such as China (FXI), Taiwan (EWT), and Brazil (EWZ). A relatively new ETF that many traders may not yet be familiar with is the Market Vectors Russia (RSX). Launched one year ago, RSX is the first and only ETF comprised solely of publicly traded Russian-based companies. Despite recent weakness in the U.S. markets, RSX surged 4.4% and broke out to its highest level of the year yesterday. Notably, much higher than average volume accompanied the breakout, pointing to institutional demand. This is illustrated on the daily chart of RSX below:
RSX is worthy of consideration if you’re looking for an ETF with low correlation to the U.S. markets. If the domestic markets decline further in the near-term, it’s quite likely RSX will show relative strength and buck the trend. As for an entry, consider waiting for the 20-period exponential moving average on the hourly chart to rise up and provide support. With breakouts, a pullback to the 20-EMA on the hourly chart is often a low-risk entry point.
Because the main stock market indexes spent yesterday’s session consolidating in the bottom third of their previous day’s lows, the daily charts have started to form “bear flag” patterns. Unless stocks suddenly jump above yesterday’s highs in today’s session, odds are good the major indices will follow-through to the downside, on the heels of Wednesday’s break of the hourly uptrend lines. A breakdown below yesterday’s lows in the S&P 500 and Dow Jones Industrial Average would also coincide with a break of their 20-day EMAs, thereby triggering further downside momentum. The Nasdaq Composite is still 1.5% above its 20-day EMA.
If the S&P 500 and/or Dow Jones Industrial Average fall firmly below their 20-day EMAs, expect the next major support to be found at their 50-day MAs. For the S&P, the 50-day MA is at 1,352. The Dow will meet its 50-day MA at 12,498. Our new position in the UltraShort Dow 30 ProShares is showing an unrealized gain, so we will trail the stop higher to protect profits as it moves further into the money.
Today’s Watchlist:
There are no new setups in the pre-market. As always, we’ll send an Intraday Trade Alert if/when we enter anything new.
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):
-
UUP long (1,300 shares from April 25 entry) – bought 22.68 (avg.), stop 22.39, target 23.72, unrealized points = + 0.20, unrealized P/L = + $260
DXD long (350 shares from May 7 entry) – bought 50.79, stop 48.89, target 56.30, unrealized points = + 0.65, unrealized P/L = + $228
Closed positions (since last report):
-
(none)
Current equity exposure ($100,000 max. buying power):
- $47,748
Notes:
No changes to our open positions at this time.
Edited by Deron Wagner,
MTG Founder and
Head Trader