Commentary:
Stocks chopped around throughout the first half of yesterday’s session, but a late-day sell-off caused the major indices to pull back substantially. The S&P 500 gave up an intraday gain of 0.7% to finish lower by the same percentage. The Nasdaq Composite also lost 0.7%, though it only showed a gain of 0.3% at its peak. The Dow Jones Industrial Average was lower by 0.9%. The S&P Midcap 400 only slipped 0.1%, but the small-cap Russell 2000 fell 0.6%. All the major indices finished near their worst levels of the day.
Trading eased across the board for a third straight day. Total volume in the NYSE declined 3% below the previous day’s level, as volume in the Nasdaq receded 1%. Declining volume exceeded advancing volume by approximately 2 to 1 in the NYSE. The Nasdaq adv/dec volume ratio was negative by roughly 3 to 1.
As we illustrated a few days ago, the main stock market indexes remain firmly in intermediate-term downtrends, as well as overall short-term downtrends. Because the S&P 500 is still in the middle of its descending trend channel, well below resistance levels, there have been no changes to the overall bias of the market. Your best odds of profitability continue to lie on the short side of the stock market, or at least in the inversely correlated ProShares UltraShort family of ETFs.
Over the past several days, we have pointed out a few potential short sale setups. Yesterday, iShares DJ Transportation (IYT) triggered our short entry. If today’s opening gap down holds into the open, we may see the Market Vectors Steel (SLX) trade through our trigger price for short entry as well. On the long side, there is no need to be in a hurry. At the least, we need to see the major indices start to break out above their downtrending channels, as well as their 20 and 50-day moving averages.
Today’s Watchlist:
Market Vectors Steel (SLX)
Short
Shares = 150
Trigger = below 102.57 (below the 50-day MA and June 16 low)
Stop = 106.70 (above the 20-day EMA)
Target = 91.18
Dividend Date = December 2008
Notes = This setup did not yet trigger, but remains on our watchlist going into today. Note the updated share size and trigger price. See commentary in the June 16 issue of The Wagner Daily for explanation of this setup.
KEY TIP: Be aware that SLX may be on your broker’s “hard to borrow” list. This means your brokerage firm’s web site may initially tell you that shares are not available for shorting. But if this occurs, we recommend you phone your broker and specifically ask them to locate shares to borrow for short selling. With a little push, your firm should easily be able to call around and get shares for you within a matter of minutes. If not, consider switching to a different firm who offers a wider selection of stocks and ETFs for shorting. Just a little advice for those of you who run into this issue.
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):
- DUG hit its stop yesterday.
- Both IYT and SLX failed to trigger yesterday, but remain on our watchlist going into today.
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RSX long (400 shares from June 13 entry) – bought 55.55, stop 54.22, target new high (will trail stop), unrealized points = + 0.83, unrealized P/L = + $332
IYT short (200 shares from June 17 entry) – sold short 91.81, stop 94.38, target 86.18, unrealized points = + 0.18, unrealized P/L = + $36
SLV long (150 shares from June 3 entry) – bought 170.72, stop 166.30, no specific target (will trail stop), unrealized points = (1.70), unrealized P/L = ($255)
Closed positions (since last report):
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DUG long (350 shares from June 3 entry) – bought 29.60, sold 27.13, points = (2.47), net P/L = ($872)
Current equity exposure ($100,000 max. buying power):
- $66,231
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader