A tug-of-war between the bulls and bears led to an erratic, indecisive session of trading yesterday. By the closing bell, the bulls slightly claimed the upper hand, as most of the major indices finished modestly higher, and just above the middle of their intraday ranges. The Nasdaq Composite gained 0.5% and the S&P 500 advanced 0.2%, but the blue-chip Dow Jones Industrial Average closed 0.3% lower. Small and mid-cap stocks showed relative strength; both the Russell 2000 and S&P Midcap 400 indices climbed 1.1%.
Total volume in the NYSE was on par with the previous day’s level, but turnover in the Nasdaq increased 10% The higher volume gain in the Nasdaq enabled the index to score a bullish “accumulation day.” However, based on the choppy intraday price action, relatively small gains of the S&P and Nasdaq, and the loss in the Dow, it’s safe to say yesterday was not a clear cut day of institutional buying. In both exchanges, advancing volume only marginally exceeded declining volume.
For intermediate-term trends, we typically focus on chart patterns of the daily and weekly time intervals. Since the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average held support of their late December lows, but failed to move back above their 50-day moving averages, yesterday’s action did little to change the intermediate-term picture of the broad market. However, drilling down to a smaller time frame, we see the main stock market indexes may be poised to break out above resistance of their short-term downtrend lines, visible most easily on the 60-minute (hourly) intraday charts. Below, we’ve annotated the one-week downtrend line on the hourly chart of Ultra S&P 500 ProShares (SSO), a popular ETF proxy for the S&P 500 Index (moving averages removed so you can more easily see the trendline):
Although SSO closed right at resistance of its downtrend line, this time it held support of the previous day’s low. Unless that ultra short-term “double bottom” is broken in today’s session, we should expect the SSO (and the S&P 500 Index) to break out above the short-term downtrend line shown above. If it does, we’ll be closely monitoring how much momentum is behind the breakout, which would represent an attempted resumption of the intermediate-term uptrend from the November 2008 lows. A similar short-term pattern is found on the hourly chart of Ultra QQQ ProShares (QLD), a well-known ETF proxy for the tech-heavy Nasdaq 100 Index:
Because of the short-term basing patterns shown above, we bought Ultra S&P MidCap ProShares (MVV) late yesterday afternoon. Though MVV has not yet broken out above resistance of its short-term downtrend line, we bought it because the S&P Midcap 400 is the only one of the major indices that has not broken below its 50-day moving average this week. This is in line with yesterday’s comment of, “new long positions only make sense if the major indices manage to reclaim their 50-day MAs.” On the daily chart of the S&P Midcap 400 below, notice how the index is trying to reverse right at support of its 50-day MA, thereby creating an ideal buy entry with a positive risk/reward ratio:
If the S&P 500 and Nasdaq hold above their short-term downtrend lines and start to pick up bullish momentum, MVV should show relative strength to the rest of the broad market because it has less technical resistance to contend with. Still, to protect against the possibility of a failed bullish reversal, we’re running a tight protective stop just below the late December “swing low” of $21.60.
Earnings season has begun kicking into high gear, as both Intel and JP Morgan Chase are slated to report their latest quarterly results tomorrow. Next week, a slew of other market-moving companies will report as well. We all know earnings reports are generally not expected to be impressive, but this is could be a good thing for the market if investors’ mental expectations are already low enough. With earnings reports, it’s always the stock market’s subsequent reaction that matters, not the actual results.
There are no new ETF trade setups in the pre-market today. Various oil-related ETFs (DIG, OIH) may be setting up for swing entry on the long side, but we’ll first assess overall market action before entering new positions.
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):
- Per Intraday Trade Alert, we bought MVV late yesterday afternoon. No changes to other open positions.
- For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.
- 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.
MVV long (300 shares from Jan. 13 entry) –
bought 23.58, stop 21.38, no target (will trail stop), unrealized points = (0.07), unrealized P/L = ($21)
SLV long (800 shares total; 600 from Dec. 26 entry, 200 from Jan. 6 entry) –
bought 10.64 (avg.), stop 10.22, target 13.45, unrealized points = (0.04), unrealized P/L = ($32)
GDX long (150 shares from Dec. 26 entry) –
bought 31.40, stop 26.68, no target (will trail stop), unrealized points = (1.88), unrealized P/L = ($282)
TAN long (500 shares from Jan. 8 entry) –
bought 8.72, stop 7.28, target 11.41, unrealized points = (0.86), unrealized P/L = ($430)
Closed positions (since last report):
Current equity exposure ($100,000 max. buying power):
Edited by Deron Wagner,
MTG Founder and