Commentary:
Gapping substantially higher on yesterday’s open, the stock market initially looked as though it was going to break out above its recent range. However, the bears quickly took control, reversing the opening momentum and sparking a sharp sell-off. Stocks trended steadily lower throughout most of the day, but rallied off their lows to reclaim a majority of their losses in the final ninety minutes of trading. The Nasdaq Composite, down 1.8% at its intraday low, lost only 0.4%. Both the S&P 500 and Dow Jones Industrial Average recovered from similar losses to close just 0.3% lower. The small-cap Russell 2000 and S&P Midcap 400 indices fell 0.8% and 0.5% respectively. Each of the major indices settled in the middle of its intraday range.
Turnover swelled across the board, causing both the S&P 500 and Nasdaq Composite to register a bearish “distribution day.” Breaking its seven-day streak of declining volume, the NYSE saw a 15% jump in volume. Trading in the Nasdaq rose 10% above the previous day’s level. Although the late afternoon recovery was encouraging, the losses on higher volume still pointed to institutional selling in both exchanges.
One sector that help up well to yesterday’s selling is Oil. Within the oil industry, several ETFs are poised for potential breakout, which would likely occur on any further strength in the broad market. One such ETF we’re monitoring for possible breakout is ProShares Ultra Oil and Gas (DIG):
Two weeks ago, DIG broke out above an area of horizontal price resistance, then entered into another pattern of consolidation. This created what is known as a “base on base” formation the daily chart. When this occurs, the upward move that follows can be strong, due to accumulated momentum from a breakout of two bases of consolidation. With this setup, one needs to be aware of the 200-day MA (presently at $33.81). However, momentum from its “base on base” breakout may enable DIG to slice right through that level of resistance. Other ETFs in the sector we like include: iShares Oil and Gas (IEO), Oil Service HOLDR (OIH), and Energy Bull 3X (ERX).
PowerShares Agriculture Fund (DBA) has pulled back to support of its 20-day exponential moving average (EMA), and now has big support of its 50 and 200-day moving averages below. We like DBA for a continuation rally, with an entry above its two-day high of $27.96. The daily chart of DBA is shown below:
Market Vectors Agribusiness (MOO), whose portfolio consists of agriculture-related companies, has been consolidating in a tight range, above support of its 20-day EMA. A breakout should lead to continuation of the established uptrend that began in ealy May. MOO can be bought above yesterday’s high of $38.29, as that would lead to a resumption of the current uptrend:
The major indices remain stuck in the middle of their recent trading ranges. However, like we said yesterday, “the good news is that this indecision won’t last forever. In fact, it probably won’t be more than a few more days until stocks make a convincing, decisive move out of the range.” Stay nimble and ready to switch to market direction if your positions are on the wrong side of the eventual breakout.
Today’s Watchlist:
There are no new setups in the pre-market today, but MOO, DBA, and DIG are on our watchlist for potential entry. As always, we’ll promptly 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.
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Open positions (coming into today):
- Per Intraday Trade Alert, we bought SRS yesterday, as it popped above short-term resistance on increasing volume. The late-day rally in the market caused SRS to give back its earlier gains; however, due to weakness in the real estate sector, the ETF still showed relative strength throughout the day.
- 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.
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SLV long (500 shares from June 8 entry) – bought 14.60, stop 13.12, target 19.12, unrealized points = + 0.41, unrealized P/L = + $205
SRS long (500 shares from June 10 entry) – bought 18.76, stop 17.39, target 22.70, unrealized points = (0.24), unrealized P/L = ($120)
IBB long (200 shares from June 8 entry) – bought 70.04, stop 67.12, target 76.48, unrealized points = (0.63), unrealized P/L = ($126)
Closed positions (since last report):
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(none)
Current equity exposure ($100,000 max. buying power):
- $30,647
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader