Commentary:
After opening slightly higher yesterday morning, stocks sold off into the first hour of trading, but persistent bulls again bought the dip, enabling the major indices to begrudgingly move higher later in the afternoon. Blue chips showed relative strength for a change, as the Dow Jones Industrial Average climbed 0.6%. The Nasdaq Composite gained 0.5% and the S&P 500 advanced 0.3%. The small-cap Russell 2000 and S&P Midcap 400 indices both finished 0.8% higher. With thirty minutes until the closing bell, the broad market briefly popped to new intraday highs, but traders sold into that burst of strength, causing the main stock market indexes to only finish near the upper quarter of their intraday ranges.
Turnover swelled across the board. Total volume in the NYSE surged 23% above the previous day’s level, while volume in the Nasdaq ticked 11% higher. The gains on higher volume were indicative of increased participation amongst mutual funds, hedge funds, and other institutions. However, market internals were not overly impressive. In the NYSE, advancing volume exceeded declining volume by a margin of less than 3 to 2. The Nasdaq adv/dec volume ratio was positive by just under 2 to 1.
Recently, we looked at the bullish consolidation in Market Vectors Agribusiness (MOO), an ETF comprised of individual stocks pertaining in some way to the agriculture industry. Over the past week, its trading range has tightened up, and it’s now in the process of breaking out above the high of its recent consolidation. Showing relative strength to the broad market with a 1.5% gain yesterday, the cutely named MOO closed yesterday just a few pennies above the pivotal breakout level. A rally above yesterday’s high would now present a breakout buy entry. The setup is shown on the daily chart below:
Yesterday, the spot gold commodity futures finally finished the regular trading session firmly over the closely watched $1,000 level. This correspondingly caused SPDR Gold Trust (GLD) to move to the top of its recent trading range, and positions the ETF for a gap to a new all-time high. We expect the tight range highlighted on the weekly chart below to soon lead to another leg up in the price of GLD, as well as in the leveraged Gold Double Long (DGP):
Although it was lagging the price of GLD for many months, iShares Silver Trust (SLV) has recently been playing “catch up.” Yesterday, GLD closed just below its intraday high of September 11, but SLV showed relative strength by already closing above the high of its recent range. Unlike GLD, SLV is still well below its all-time high, but there is also little in the way of technical resistance to hold SLV down in the near-term. As shown on the weekly chart below, SLV does not have much overhead supply to contend with until it reaches the $19 area:
Over the past few days, a handful of subscribers have e-mailed us to say they believe there’s been an excessive amount of market “manipulation” going on, which has been causing the market to continue moving higher without pause. We tend to discount that notion and believe there’s no more “manipulation” occurring now than at any other time. However, we will say there’s been an uncanny amount of “buying the dips” over the past two weeks, which has prevented even early morning weakness from materializing by the closing bell. It has also been causing practically all stops to get run on the short side, even in stocks and ETFs that have been exhibiting major relative weakness and/or bearish chart patterns. As such, we’ve not had success with our short positions in recent weeks, regardless of the sound technical reasons we had for entering them in the first place. Whether the inordinate amount of buying on dips makes sense or not, who are we to fight it? While the reward-risk ratio may not be overly conducive to excessive new long positions at this time, it’s wrong to be short right now, at least until the market proves otherwise.
Today’s Watchlist:
There are no new setups in the pre-market today. As per above, we’re stalking MOO for potential buy entry, and may enter if it gaps up and holds. If we do, 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.
- DXD and RKH stopped out yesterday. Because we smelled a “stop run” in RKH, we re-entered the position when it subsequently reversed sharply lower, but the re-entry later hit its tight stop over the morning high of the day.
- DBB triggered for buy entry yesterday.
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Admittedly, we’ve become a bit out of sync with the market here. We had sound technical reasons for entering the short positions we recently entered (primarily relative strength), but we humbly admit we were just plain wrong. Traders seem to be buying every single dip in the market, no matter how minor. Unfortunately, it’s not until hindsight that we see our proven strategies are not working too well right now. Nevertheless, we’ve been on the wrong side of the market numerous times over the past seven years in this newsletter’s existence, and there will undoubtedly be more times in the future. But following our plan has enabled us to consistently outperform the broad market over the long-term, and nothing has changed in this regard. Short-term runs of negative standard deviation are simply a part of the trading business.
- 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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Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader