Commentary:
The stock market continued its impressive winning streak yesterday, as the major indices scored another round of solid gains. Stocks gapped higher on the open, oscillated in a narrow range throughout most of the day, then made a final push higher in the last hour of trading. Registering its ninth straight win, the Nasdaq Composite climbed 1.7%. The Dow Jones Industrial Average advanced 1.2%, as the S&P 500 finished 1.1% higher. The small-cap Russell 2000 and S&P Midcap 400 indices logged identical gains of 1.5%. All the main stock market indexes again closed near their best levels of the day.
Total volume in the Nasdaq swelled 11%, enabling the tech-heavy index to log a bullish “accumulation day.” However, turnover remained below its 50-day average level. Volume in the NYSE was 13% lighter than the previous day’s level, and also slower than average. As the “summer doldrums” are now in full swing, it’s not surprising that the pace of trading has been lethargic. So far this month, both the NYSE and Nasdaq have had only two sessions in which volume was greater than average. Yesterday’s market internals confirmed the bullish session. In both exchanged, advancing volume exceeded declining volume by more than 3 to 1.
Yesterday, we sold our position in iPath India Index (INP), which we bought for a “swing trade” on July 8. The trade worked out well, yielding a gain of more than 13% on a hold time of less than two weeks. The initial entry was made because INP was a strong international ETF that had pulled back to “undercut” major support of its 50-day moving average, as well as a large breakaway “gap” from two months prior. After drifting around below its 50-day MA for a few more days, INP resumed its dominant uptrend, rallying all the way back to test the area of its prior highs yesterday. For educational purposes, we’ve annotated our entry and exit points on the daily chart below:
After taking profits on INP, we subsequently sent an Intraday Trade Alert to subscribers, informing them of our new buy entry into CurrencyShares Japanese Yen (FXY). On July 8, FXY broke out above a significant area of horizontal price resistance, on volume that was more than 600% greater than average. Since then, FXY has been drifting lower, but reversed after coming into support of its 20-day EMA and prior “swing high” yesterday afternoon. Taking advantage of the pullback to support, we bought FXY with the expectation of a positive reward/risk ratio for the trade. Our initial protective stop is just below the 50-day moving average (the teal line on the chart below):
Going into today, we’re still stalking various tech-related ETFs for pullback buy entries. We’re also monitoring CurrencyShares British Pound (FXB) for potential buy entry, on a breakout above major price consolidation (as discussed and illustrated in our July 17 commentary). Today, the S&P and Dow are likely to test pivotal resistance of their June 2009 highs. We’ll be watching these levels closely, to see whether or not both indexes manage to join the Nasdaq at a new nine-month high. Because the overall market has been acting well, there’s no reason to assume resistance of the June highs will spark a substantial correction; nevertheless, it’s a possibility of which one should be cognizant.
Today’s Watchlist:
CurrencyShares British Pound (FXB)
long
Shares = 100
Trigger = 166.18 (above the high of the consolidation)
Stop = 159.90 (below the “swing low” and 50-day MA support)
Target = 177.80 (approx. 61.8% Fibonacci retracement of last move down)
Dividend Date = n/a
Notes = This setup from yesterday did not yet trigger, but remains on our watchlist going into today. As the U.S. dollar continues to weaken against global currencies, the British Pound (FXB) is setting up for potential breakout entry. We plan to buy on a rally above the high of the consolidation.
In addition to FXB, we continue to monitor the strong tech ETFs for potential buy entry on the first substantial pullback. We’ll send an Intraday Trade Alert if/when we enter any other new positions 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.
PLEASE NOTE: As of July 1, we have updated to a more “user friendly” format for reporting open and closed positions (see below). Based on the familiar Microsoft Excel style, we believe the new, simplified format makes it much easier to see the status of all positions with just a quick glance. What do you think? We’d love to hear your opinion on the new format change. Just send an e-mail to [email protected].
- Per Intraday Trade Alert, we made a judgment call to sell INP into strength, right after the open, locking in a solid gain of more than $1,000.
- Per Intraday Trade Alert, we bought FXY yesterday afternoon, as it bounced off support of its 20-day EMA and prior “swing high.” Trade details listed above.
- 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.
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader