The Wagner Daily


Stocks followed up Tuesday’s sell-off with a rather tepid response. The major indices bobbed and weaved on both sides of the flat line before settling near unchanged levels. The Dow Jones Industrial Average eked out a gain of less than 0.1%, the S&P 500 lost 0.1%, and the Nasdaq Composite declined 0.2%. Small and mid-cap stocks exhibited relative weakness; the Russell 2000 and S&P Midcap 400 indices fell 1.3% and 1.2% respectively. Most of the main stock market indexes finished near the middle of their intraday ranges, indicating indecision into the close.

Total volume in the NYSE declined 10% below the previous day’s level, while volume in the Nasdaq receded 11%. It was a quiet day overall, but turnover in both exchanges still exceeded 50-day average levels. Market internals were negative, but only by a small margin. In the NYSE, declining volume beat advancing volume by 2 to 1. The Nasdaq adv/dec volume ratio was only fractionally negative.

Aside from the strength in precious metals, one of the few industry sectors showing relative strength is healthcare. Though the major indices recently broke support of their intermediate-term uptrend lines, several healthcare ETFs continue to show bullish divergence. So far this month, the S&P 500 is showing a loss of 4.1%. Comparatively, iShares U.S. Healthcare (IYH) is down less than 0.1%. Even better is the month-to-date 0.9% gain in iShares Nasdaq Biotech (IBB), which we’ve been long since Februrary 3. The “percentage change chart” below clearly illustrates the relative strength these ETFs have been showing to the broad market:

Throughout the first ten days of the month, the two healthcare ETFs were roughly following the direction of the S&P 500. However, as the broad market sold off over the past week, the bullish divergence (relative strength) became more apparent. Because the healthcare sector has held firm in the face of broad-based weakness, we should expect the sector to outperform the gains of the S&P 500 whenever stocks eventually bounce. Further, the daily charts of both IYH and IBB remain healthy:

The February 17 sell-off in the broad market caused the major indices to technically break support of their intermediate-term uptrend lines. However, our overall bias remains neutral to only slightly bearish, as the Dow is still holding support of its November 2008 low. With all the bad news flying around, as well as an unenthusiastic reception to Obama’s mortgage rescue plan announced yesterday, one might assume stocks would already be making another leg down, below their November 2008 lows — but they have not. With the main stock market indexes below support of their multi-month uptrend lines, but still holding their November 2008 lows, a neutral bias simply makes sense. This means a dominant cash position is a good bet for now, until the market shows its hand.

Today’s Watchlist:

There are no new setups in the pre-market today. As always, we’ll send an Intraday Trade Alert if we spot anything we decide to enter today.

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):

      IBB long (150 shares from Feb. 3 entry) –

      bought 72.12, stop 68.52, target 78.80, unrealized points = (0.47), unrealized P/L = ($71)

      EWZ long (200 shares from Feb. 12 entry) –

      bought 37.48, stop 34.68, target 47.28, unrealized points = (1.68), unrealized P/L = ($336)

    Closed positions (since last report):


    Current equity exposure ($100,000 max. buying power):



    • No changes to our open positions 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.
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Edited by Deron Wagner,
MTG Founder and
Head Trader