Commentary:
Investors seemed content to play it close to the vest ahead of today’s Fed meeting, as evidenced by the tight-ranged intraday action that formed an inside bar on the daily charts of broad market indices. The majority of the day’s gains arrived in the first half hour of trading, as the rest of the day was very much a chop fest. Markets did attempt to rally a few times intraday, but each run at the day’s high lacked momentum in price and in the internals. The S&P MidCap 400 and small-cap Russell 2000 closed up 1.4% and 1.3% respectively, followed by the S&P 500 at 1.1%, and the Nasdaq Composite at 1.0%. The Dow Jones Industrials was a minor laggard, gaining just 0.7%.
Not surprisingly, total volume eased off on both exchanges. NYSE volume dropped 7%, while Nasdaq volume came in 1% lighter. There isn’t much to take away from the price and volume action as of late, as we continue to chop around on lower volume.
The hourly charts of the major averages above clearly show the bottoming out action over the past two weeks. The obvious buy points are above the horizontal lines, over the two-day high. Since these levels are pretty obvious, we’d expect a fair amount of head fakes above and below the current range highs, especially if the breakouts occur at or near today’s 2:15 FOMC announcement. Fed days are challenging, as the main stock market indexes often ignore key technical support and resistance levels that would otherwise be significant.
After a 10 point selloff over the past six sessions, TLT finally manged to catch a bid yesterday:
Today’s reversal action may have been a combination of short covering and investors seeking safe ground ahead of today’s Fed meeting. We expect any bounce to be short lived, as there is quite a bit of resistance waiting at the 111.00-113.00 level. As we have mentioned in past reports, further weakness in TLT should bode well for the stock market, as money flows out of safety and in to risk. Whether or not this relationship will prove itself true remains to be seen; however, TLT is certainly worth monitoring on a daily basis along with the financials to gather valuable insight on future market direction.
Since the failed breakout attempt above the December swing highs in early January, broad market indices have sold off as much as 10% to 15% (from the January 6 high). Investor confidence, which was riding high off the November bottom looks to have lost some steam over the past few weeks. The recent setback in the market may have been the washout that is necessary to kickstart a strong rally. A big volume breakout to the upside on a Fed day would probably catch the majority of investors off guard here. We often quote the motto “trade what you see, not what you think”, so this is not a prediction, but more of a “be prepared for anything” reminder.
Today’s Watchlist:
Due to the light volume and choppy price action as of late, there hasn’t been much in the way of long or short setups. Aside from our two metal longs, we are sitting tight in cash, waiting for the market to reveal its true direction. We expect a volatile afternoon session. If any new trades are made we will send an intraday alert.
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.
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Open positions (coming into today):
- FOMC interest rate announcement today at 2:15 pm.
- 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.
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DGP long (450 shares from Jan. 15 & 23 entries) –
bought 16.20(avg), stop 16.45, target 21.70, unrealized points = + 2.84 unrealized P/L = + $1,274
GDX long (150 shares from Dec. 26 entry) –
bought 31.40, stop 26.48, no target (will trail stop), unrealized points = + 2.07, unrealized P/L = + $309
Closed positions (since last report):
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(none)
Current equity exposure ($100,000 max. buying power):
- $13,589
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader