After a choppy morning session, stocks sold off throughout much of the afternoon, then bounced off their lows in the last half hour of trading. With the exception of the S&P Midcap 400, yesterday’s selling pressure forced all the major indices to retreat back below their 50-day moving averages after holding above for just two days. The Nasdaq Composite lost 1.7%, the S&P 500 2.1%, and the Dow Jones Industrial Average 2.5%. The small-cap Russell 2000 and S&P Midcap 400 indices fell 1.5% and 1.8% respectively. Overall, broad market losses were moderate, and the bullish short to intermediate-term trends remain intact.
The bullish volume pattern in the Nasdaq continues, as total volume decreased 6% below Wednesday’s pace. However, total volume came in 2% higher on the NYSE, registering the second bearish “distribution day” in recent weeks. While the higher volume is a bit of a concern, the major indices are still holding above their December 12 “swing lows,” so the current rally still has good odds of pushing higher over the next week.
In November, Gold (GLD) bottomed out on the weekly chart, around $70.00, then had a strong run-up to resistance of its primary downtrend line. Yesterday, GLD entered pullback mode. Here are a few gold-related setups with potential pullback entry points:
As the chart above shows, GLD has backed off from resistance after a sharp rally off the lows. A little more time will tell just how this pullback should be played. We are expecting either a shallow bull flag pattern that consolidates just below the 200-day MA, or a deeper retracement to support of the prior swing high, around $82.00.
The Gold Miners ETF (GDX) is another way to participate in the recent strength in gold. Powerful moves in stock tickers such as NEM, RGLD, GOLD, and ABX fueled the recent downtrend line break in GDX. A pullback to the $27.00 – $28.00 area is a low-risk entry point:
The Powershares Precious Metals Fund (DBP) broke out above its downtrend line on December 16 (note the heavy volume on the chart below). While this is not a pure play on gold (the weighting is 80% gold and 20% silver), the recent strength in silver (SLV) makes this an attractive buy on a light volume pullback to the $28.00 – $28.50 area:
With crude oil (and USO) closing at a new 52-week low yesterday, a few energy setups we were considering for potential breakout entries above their 50-day MAs came under heavy selling pressure:
Whether or not these breakdowns are just a shakeout beneath the lows of a tight range, or the beginning of the next leg down remains to be seen. We still have no clear trigger for a long entry, so we will continue to monitor the action from the sidelines.
With the broad market range bound over the past two weeks, yesterday’s selling had little effect on the technical picture. Broad market indices were able to find support from their 20-day EMAs, sitting right below the 50-day MAs. Barring any future distribution days, the short to intermediate-term outlook remains in good shape. Note that today is “triple witching” options expiration day, so be prepared for more volatility than usual, especially in the afternoon.
There are no new setups in the pre-market today, as we’re waiting for confirmation the major indices will break out above resistance of last week’s highs before buying anything new. We also tend to avoid new ETF entries on “triple witching” options expiration days.
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. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices.
Open positions (coming into today):
- No changes to our open positions at this time. If the major indices rally above their recent highs, we’ll tighten our stops further. But for now, our ETF positions are simply in very short-term consolidation patterns near their recent highs.
- Remember that positions are automatically sold into strength if any ETF hits its target price listed above.
- Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
INP long (250 shares from Dec. 9 entry) –
bought 29.21, stop 29.78, target 35.70, unrealized points = + 4.27, unrealized P/L = + $1,065
FXI long (200 shares from Dec. 5 entry) –
bought 27.18, stop 26.88, target 34.10, unrealized points = + 3.30, unrealized P/L = + $658
QLD long (300 shares from Dec. 12 entry) –
bought 26.08, stop 25.12, target 32.60, unrealized points = + 0.85, unrealized P/L = + $255
SMH long (500 shares from Dec. 9 entry) –
bought 17.27, stop 16.78, target 19.71, unrealized points = + 0.01, unrealized P/L = + $5
Closed positions (since last report):
Current equity exposure ($100,000 max. buying power):
Edited by Deron Wagner,
MTG Founder and