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The Wagner Daily


Commentary:

Fighting off morning losses to close slightly higher, the stock market once again demonstrated its incredible resiliency we’ve become accustomed to in recent weeks. After opening near the flat line, stocks trended lower throughout the first ninety minutes of trading, but the bulls reclaimed the upper hand. The major indices grinded their way back into positive territory, though trading remained quiet. The S&P 500 gained 0.3%, the Dow Jones Industrial Average 0.2%, and the Nasdaq Composite 0.1%. Both the small-cap Russell 2000 and S&P Midcap 400 indices advanced 0.5%. As is frequently the case during bull markets, all the main stock market indexes finished near their intraday highs.

Turnover remained soft, as volume was little changed from the previous day’s levels. Total volume in the NYSE was 2% higher, while volume in the Nasdaq eased 3%. Trading in both exchanges was below 50-day average levels. Considering the modest gains of the major indices, market internals were pretty good. In both the NYSE and Nasdaq, advancing volume exceeded declining volume by a ratio of just under 2 to 1.

Yesterday, we began analyzing charts of ETFs with relative strength that we’re stalking for possible buy entry on a pullback. Today, we resume our analysis of potential trade setups, taking a look at a few strong ETFs not correlated to the technology sectors.

Biotech stocks have rocketed higher over the past several days, causing technical breakouts in ETFs such as the Biotech HOLDR (BBH) and iShares Nasdaq Biotech (IBB). Not too long ago, the biotechs were rather stagnant, but that has definitely changed! The daily chart of IBB is shown below:

Because the gains of the past three days have been so explosive, it’s unlikely IBB will retrace all the way down to support of its breakout above the June 2009 high (the red, dotted horizontal line). Frankly, such a retracement would probably be too steep to be healthy. However, a pullback to the area of the February 2009 highs (the blue, dashed horizontal line), around $75, could present a low-risk pullback entry point. If using Fibonacci analysis to predict the extent of a pullback, one will notice the 38.2% Fibonacci retracement is near the $75 level as well (from this month’s low to yesterday’s high). Finally, the 10-day moving average (the dotted purple line), a reliable indicator of short-term support in strongly trending ETFs, is rapidly rising higher. In just a few days, the price of the 10-day MA will converge around the $75 area as well. But even if IBB is so strong that it doesn’t pullback from here, we will look for the development of a short-term consolidation, or a possible “bull flag” pattern. With such newfound, bullish momentum in biotechs, IBB joins SMH (Semiconductor HOLDR) on our buy watchlist.

On the international front, it may soon be time to re-enter iPath India Index (INP), which we recently bought on a pullback to its 50-day MA, then subsequently sold into strength, for a large gain, as it tested resistance of its 52-week high. Since our exit about one week ago, INP has merely traded sideways, in a tight range, right at pivotal resistance of its 52-week high. If it breaks out above that level in the coming days, we like it for buy re-entry. Even though we would be buying at a slightly higher price than our original exit, we have not had the risk of holding INP through what could have been another correction. For us, it made sense to sell into strength, locking in the profit, then let INP prove it’s worthy of making another leg higher:

Unlike SPDR Gold Trust (GLD), which follows the price of the spot gold commodity contracts, Market Vectors Gold Miners (GDX) is comprised of a basket of individual gold mining stocks. On July 20, GDX broke its intermediate-term downtrend by gapping above resistance of its “swing high” and 50-day moving average. Since then, GDX has been consolidating in a very narrow, sideways range, right above support of its 50-day MA. In the near-term, we’re anticipating a breakout above this range, which could spark enough momentum to send GDX to test its 52-week high:

Because we’re already positioned in Gold Double Long (DGP), we will probably not “officially” buy a breakout in GDX. Exposure of just one precious metals ETF is enough for us. However, if you’re not already in GLD or DGP, or if you want to take advantage of the pattern in gold, without actually trading a commodity ETF, GDX may be of interest if/when it breaks out.

The S&P 500 is now less than 2% away from the 1,000 level. On a purely technical level, this is irrelevant, as there is little in the way of price resistance at the 1,000 level. Nevertheless, the index may encounter “psychological” resistance because of 1,000 being a large, round number that the general public thinks has some kind of important meaning. Remember how the popular financial media threw a party when the Dow first made it above the 10,000 level? Technically, it meant nothing, but it became an important level as a self-fulfilling prophecy. So, that being said, be on the lookout for possible selling into strength as the S&P nears the 1,000 level.

NOTE: In the first paragraph of yesterday’s commentary, there was a typo; “the evening of June 23” should have read “the evening of July 23.”


Today’s Watchlist:

There are no new setups in the pre-market today. However, SMH, IBB, and INP are among a handful of ETFs we’re stalking for potential buy entry in the near-term. If we enter any of these today, we’ll promptly send an Intraday Trade Alert with details.


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].

    Notes:

  • No changes to our open positions 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.

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Edited by Deron Wagner,
MTG Founder and
Head Trader

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