Commentary:
Stocks snapped their three-day losing streak yesterday, but a flat session in the Nasdaq, combined with lower volume across the board, made for an uneventful session. The major indices opened near the flat line, moved higher in the first hour of trading, then chopped around in a sideways range throughout the rest of the day. Although the S&P 500 gained 0.8% and the Dow Jones Industrial Average advanced 0.7%, the Nasdaq Composite was merely unchanged. The small-cap Russell 2000 and S&P Midcap 400 indices bounced 0.5% and 0.7% respectively. The main stock market indexes settled around the upper third of their intraday ranges.
Total volume in both the NYSE and Nasdaq limped in 17% lighter than the previous day’s levels, indicating a lack of participation among hedge funds, mutual funds, and other institutions. Turnover in the Nasdaq fell back below its average level, while trading in the NYSE remained below average for the twenty-fifth consecutive day. Advancing volume in the NYSE exceeded declining volume by less than 2 to 1. The Nasdaq adv/dec volume ratio was marginally negative.
On June 11, we bought the U.S. Natural Gas Fund (UNG), after it broke out above resistance of a one-month downtrend line. Since then, UNG has been forming a base of support, in a tight range, above its 20 and 50-day moving averages. Assuming this base of consolidation holds up, look for UNG to break out above the range in the coming days. If it does, a “higher high” and “higher low” would be formed, causing the intermediate-term trend of UNG to become bullish. If you missed our initial entry into UNG, a secondary buy point could be found on a breakout above the high of the range, around the $16.40 area. Take a look:
Yesterday’s bounce in the S&P 500 coincided with the index coming into key support of its 200-day moving average on June 17, which is also the reason we took profits on most of our short exposure that day. While the bounce off the 200-day MA was to be expected, the question on everyone’s minds is whether stocks will quickly recover back to their recent highs, or only retrace a portion of their recent losses before heading back down. Other pullbacks within the uptrend of the past few months have been short-lived, so there’s not yet a definitive reason to assume this time will be different. However, one thing that’s different about the current pullback has been the negative volume patterns associated with the correction (three “distribution days,” followed by a very light volume gain). Leading stocks, an important barometer of the market’s overall health, have also started to falter. For these reasons, we have been less aggressive with new buy entries on the pullback than we might otherwise be. The bounce off the 200-day MA is illustrated on the daily chart of the S&P 500 below:
Today is “quadruple witching” options expiration, a day in which contracts for stock index futures, stock index options, stock options and single stock futures (SSF) simultaneously expire. Though we don’t trade options, it’s nonetheless important to be aware of “quadruple witching” because it tends to have a significant impact on intraday price action of stocks and ETFs. Specifically, “quadruple witching” days are usually marked by erratic, choppy price action in stocks with a large open interest in options, which is caused by market-moving institutions jockeying stocks towards their desired strike prices. For us, this simply means we usually avoid entering new ETF positions until at least the following day.
Today’s Watchlist:
There are no new setups in the pre-market today. We typically avoid entering new positions on “quadruple witching” options expiration days.
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):
- 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.
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SRS long (350 shares [half position] remaining from June 10 and 11 entries) –
bought 18.85 (avg.), stop 19.45, target 22.70, unrealized points = + 1.9, unrealized P/L = + $665
IBB long (200 shares from June 8 entry) – bought 70.04, stop 67.12, target 76.48, unrealized points = + 0.67, unrealized P/L = + $134
UNG long (400 shares from June 11 entry) – bought 15.12, stop 13.59, target 19.80, unrealized points = + 0.17, unrealized P/L = + $68
INP long (150 shares from June 17 entry) – bought 49.08, stop 44.70, target 64.20, unrealized points = (0.75), unrealized P/L = ($113)
DBA long (600 shares from June 17 entry) – bought 26.49, stop 25.72, target 28.78, unrealized points = (0.20), unrealized P/L = ($120)
SLV long (700 shares total — 500 shares on June 8, 200 shares on June 11) –
bought 14.74 (avg.), stop 13.29, target 19.12, unrealized points = (0.77), unrealized P/L = ($539)
Closed positions (since last report):
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(none)
Current equity exposure ($100,000 max. buying power):
- $60,323
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader