Commentary:
Stocks traded higher on yesterday’s open, moved in a tight, sideways range through mid-day, then exhibited the usual post-Fed volatility later in the afternoon. As largely anticipated by Wall Street, the Federal Open Market Committee (FOMC) left interest rates unchanged at 2.0%, and signaled they could raise rates in the future, but not necessarily anytime soon. Although the major indices initially surged higher on the announcement, they retraced their post-Fed gains into the close. When the dust settled, all the main stock market indexes except the Dow Jones Industrial Average had advanced. The Nasdaq Composite climbed 1.6%, the S&P 500 0.4%, and the Dow Jones Industrial Average was flat. The small-cap Russell 2000 and S&P Midcap 400 indices rallied 1.2% and 0.7% respectively. The S&P 500 and Dow Industrials closed in the bottom third of their intraday ranges, as the Nasdaq came to rest near the middle of the day’s range.
Total volume in the NYSE rose 4% above the previous day’s level, while volume in the Nasdaq conversely receded 4%. The higher volume gain of the S&P 500 technically means the index registered a bullish “accumulation day.” However, realize the increased turnover occurred during the sell-off of the final forty-five minutes of trading. This essentially invalidates any bullish signal to be gleaned by the price-volume pattern. The Nasdaq showed more promising price action, but volume in the tech-heavy exchange was lackadaisical. Advancing volume in the NYSE exceeded declining volume by a margin of 2 to 1. The ratio in the Nasdaq was positive by more than 4 to 1.
The U.S. dollar sold off immediately following yesterday’s Fed announcement, causing the CurrencyShares Euro Trust (FXE) to rally back above its 50-day moving average. Though the euro has been correcting for the past several months, the daily chart is looking as though FXE could resume its long-term uptrend in the near future. Specifically, notice that FXE is about to break out above its intermediate-term downtrend line that has been in effect for the past ten weeks:
A move above yesterday’s high would cause FXE to break out above the downtrend line illustrated above, triggering a potential buy entry. A protective sell stop could be placed just below yesterday’s low. If FXE falls below that level, it will have failed its breakout and lost support of both its 20 and 50-day moving averages.
Going into today, we don’t have a lot of ETFs on our radar screen for potential new trade entries. Rather, we want to give the stock market a day or two to show its real reaction to the Fed meeting. Typically, the initial direction stocks mover after a Fed meeting is just a knee-jerk reaction that reverses in the opposite direction two to three days later. As such, we don’t want to be too aggressive without the market first showing its hand a bit. Further, trading was already choppy and indecisive before yesterday’s announcement on interest rates and economic policy. Breakouts in both directions have been failing a day or two after they trigger a new ETF trade entry, keeping both bulls and bears on their toes. Be careful not to overtrade and churn your trading account in such conditions.
Today’s Watchlist:
There are no new setups in the pre-market today. As always, we will 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:
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Open positions (coming into today):
- Per Intraday Trade Alert, we made a judgment call to sell half of our UWM position into yesterday’s close. The late-day price action in the broad market was unimpressive, so we wanted to reduce our risk exposure on the long side. If UWM suddenly rips higher, we can jump back in the shares we sold, but we’re content to have just a small position for now.
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TAN long (400 shares from June 24 entry) – bought 28.26, stop 26.72, target new high (will trail stop), unrealized points = + 0.26, unrealized P/L = + $104
UWM long (150 shares [half position] remaining from June 24 entry) – bought 51.20, stop 49.23, target 56.70, unrealized points = (0.27), unrealized P/L = ($41)
SLX short (150 shares from June 20 entry) – sold short 105.52, stop 109.32, target 91.18, unrealized points = (0.34), unrealized P/L = ($51)
Closed positions (since last report):
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UWM long (150 shares [half position] from June 24 entry) – bought 51.20, sold 50.60, points = (0.60), net P/L = ($93)
Current equity exposure ($100,000 max. buying power):
- $34,927
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader