Commentary:
Stocks got off to a positive start last Friday morning, initially positioning the broad market for a strong finish to the week, but the major indices drifted lower throughout the day, causing them to finish with mixed results. The Nasdaq Composite advanced 0.8% and the S&P 500 gained 0.3%, but the Dow Jones Industrial Average slipped 0.3%. The small-cap Russell 2000 outperformed with a 1.5% gain, as the S&P Midcap 400 climbed 0.7%. All the main stock market indexes finished in the bottom quarter of their intraday ranges.
Turnover surged higher across the board last Friday, but the faster pace was likely attributed to “quadruple witching” options expiration day, the quarterly event in which contracts for stock index futures, stock index options, stock options, and single stock futures simultaneously expire. Total volume in the NYSE rocketed 49% above the previous day’s level, while volume in the Nasdaq swelled 15%. The accelerated trading enabled volume levels in both the NYSE and Nasdaq rise above 50-day average levels for the first time in a month, and also enabled both S&P 500 and Nasdaq Composite to register a bullish “accumulation day.” However, if not for “quadruple witching,” which usually causes volume to rise, turnover in both exchanges may not have increased at all.
Last Friday, we pointed out the potentially buyable pullback that was occurring in SPDR Gold Trust (GLD), as well as Market Vectors Gold Miners (GDX). Going into this week, we continue to monitor the performance of those ETFs, and will be looking for a possible buying opportunity. Additionally, we’re keeping an eye on the performance of GLD’s shiny cousin, iShares Silver Trust (SLV):
Until recently, spot silver was lagging and showing relative weakness to the performance of gold. But last week, SLV played “catch up” by rallying more than 5%. GLD, by comparison, gained only 2.3%. Further, we like how SLV has pulled back to support of its recent breakout level (the dashed, horizontal line), providing a low-risk buy entry. We’re planning to buy SLV on a rally above its December 19 high, as a break above that short-term hourly downtrend line will increase the odds of a resumption of last week’s breakout. Regular subscribers to The Wagner Daily will see our detailed trigger, stop, and target prices below.
In each of the past two weeks, most of the major indices have formed “doji star” candlestick patterns, which are indicative of indecision. This is shown on the weekly chart of PowerShares QQQ Trust (QQQQ), a popular ETF proxy for the tech-heavy Nasdaq 100 Index:
A “doji star” candlestick forms when the opening and closing price of a stock or ETF are roughly equal. The length of the upper and lower “wicks” can vary. This pattern is indicative of a tug-of-war between bulls and bears, with neither party winning in the end. In the case of QQQQ, its moved above and below last week’s opening price, but eventually finished the week near the opening level. The presence of two consecutive “doji stars” on the weekly charts of most of the stock market indexes tells us the major indices have been in a “holding pattern” for the past two weeks. A look at the shorter-term daily chart of QQQQ will explain why:
Since December 8, the 20-day exponential moving average (the beige line) has acted as support for QQQQ, while the 50-day moving average (the teal line) has provided resistance. This has caused the price of QQQQ to oscillate in a relatively tight, sideways range for the past two weeks. But with the 20-day EMA and 50-day MA now converging on the price of QQQQ, we should soon see resolution in one direction or the other. A close above the December 9 high of 30.83 should trigger substantial upside momentum in the intermediate-term, while a close below the December 12 low of 28.47 could easily reignite the bears. Since the S&P 500 and Dow Jones Industrial Average have similar chart patterns to the Nasdaq 100, there really isn’t much to do until stocks clearly resolve themselves in one direction or the other. Unfortunately, with the holidays fast approaching, turnover will start slowing to a crawl, creating further speculation about how the stock market will kick off the new year.
HOLIDAY SCHEDULE: The U.S. stock market will close early, at 1:00 pm ET, on Wednesday, December 24, close the entire day on Thursday, December 25, then return to a normal schedule on Friday, December 26. As such, an abbreviated version of The Wagner Daily will be published on December 24, no publication will occur on December 25, and regular publication will resume on December 26.
Today’s Watchlist:
iShares Silver Trust (SLV)
Long
Shares = 500
Trigger = 10.88 (above the Dec. 19 high)
Stop = 9.68 (below the 50-day MA)
Target = 13.45 (resistance of Sept. 2008 highs)
Dividend Date = n/a
Notes = See commentary above for explanation of the setup.
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):
- We’ve raised the stops of both SMH and QLD, as neither one has shown much momentum since entry. We’re now using breakeven stops, which removes the risk from the trades. No changes to FXI or INP stops yet.
- 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 = + 4.06, unrealized P/L = + $1,015
FXI long (200 shares from Dec. 5 entry) –
bought 27.18, stop 26.88, target 34.10, unrealized points = + 3.37, unrealized P/L = + $674
QLD long (300 shares from Dec. 12 entry) –
bought 26.08, stop 26.13, target 32.60, unrealized points = + 1.15, unrealized P/L = + $345
SMH long (500 shares from Dec. 9 entry) –
bought 17.27, stop 17.27, target 19.71, unrealized points = + 0.32, unrealized P/L = + $160
Closed positions (since last report):
-
(none)
Current equity exposure ($100,000 max. buying power):
- $31,392
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader