For the second straight day, stocks got off to a higher start, but promptly turned tail and headed south throughout the rest of the day. This time, there was no last-minute rally to minimize market losses. However, at least the major indices managed to hold above their previous day’s lows. The S&P 500 lost 1.0%, the Dow Jones Industrial Average 1.2%, and the Nasdaq Composite 2.0%. The small-cap Russell 2000 and S&P Midcap 400 indices declined 2.2% and 0.9% respectively. The main stock market indexes closed near their lowest levels of the day.
Total volume in the NYSE declined 12%, while volume in the Nasdaq was 17% lighter than the previous day’s level. Notably, turnover in the Nasdaq slipped below its average level for the first time in a month. This indicates yesterday’s losses were more the result of a lack of buying interest, as opposed to heavy selling amongst mutual funds, hedge funds, and other institutions. Although a simple lack of buying interest in the market can lead to losses that are just as sharp as those suffered under heavy institutional selling, there is one substantial difference. When the eventual impetus to buy stocks sparks the market, upside gains will usually be more significant when there is not an abundance of heavy selling (overhead supply) to overcome while the market is rallying.
What news or technical event will finally give traders and investors a reason to step back in the markets to at least spark a short-term rally? One possibility could be a rebound in the annihilated financial sector, particularly the banks. If bank stocks start to bounce off their lows, it could pull the rest of the broad market with it. After all, it has primarily been the banking stocks that have led the overall market lower on the down days.
We bring up the banking stocks because there was quite apparent relative strength in the sector yesterday. As the S&P 500 closed 1.0% lower, a vast majority of industry sectors registered losses as well. But one exception was the S&P Banking Index ($BIX), which zoomed 10.7% higher yesterday. Another important financial sector, Real Estate ($DJR), notched a respectable 2.1% gain. Within the banking index, it’s interesting to note Bank of America jumped 19% and Wells Fargo gained 18%. Granted, both stocks were merely bouncing off their lows, but the large gains were nevertheless encouraging. On the hourly chart of the $BIX, notice the index just broke out above resistance of a two-week downtrend line:
If the $BIX holds the lows of yesterday afternoon’s price consolidation, it will remain above the short-term downtrend line it just rallied above. From there, a confirmed rally above yesterday’s high could propel the index into its 20-day exponential moving average (presently at $66.20), a significant area of price resistance that stopped rally attempts twice last month. The 20-day exponential moving average is annotated on the daily chart of the $BIX below:
The big question, of course, is whether yesterday’s strength in financials was just a one-day fluke that will fade away within the next several days, or if the sudden upside momentum will continue to strengthen. If the latter situation occurs, it’s hard to imagine the overall stock market would not be inclined to move higher alongside of the financials, at least in the short-term. Nevertheless, because the financials are still at their lows, we are not suggesting buy entries into specific banking ETFs. Rather, our point is merely that you may want to keep an eye on the performance of financials in the coming days, as a potential barometer of what may follow in the broad market. ONLY FOR ADVANCED DAYTRADERS, who may wish to capitalize on potential intraday strength in the financials, here are tickers of some of the more popular ETFs to put on your watchlist: RKH, IAT, XLF, UYH, IYF, and IYR.
There are no new pre-market setups today. As always, we’ll send an Intraday Trade Alert if/when we enter anything new.
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 the 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.
- 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.
UGA long (175 shares from March 4 entry) – bought 23.41, stop 20.49, target 31.30, unrealized points = (0.52), unrealized P/L = ($91)
SLV long (400 shares from March 5 entry) – bought 13.14, stop 11.39, target 16.35, unrealized points = (0.37), unrealized P/L = ($148)
DGP long (200 shares from Feb. 26 entry) – bought 20.90, stop 18.32, target new high (will trail stop), unrealized points = (1.02), unrealized P/L = ($204)
Closed positions (since last report):
Current equity exposure ($100,000 max. buying power):
Edited by Deron Wagner,
MTG Founder and