Commentary:

Much like the previous day, the major indices spent most of the day oscillating in a relatively narrow, sideways range. This time, however, a positive opening gap enabled stocks to finish moderately higher across the board. The S&P 500 Index gained 0.7%, the Dow Jones Industrial Average 0.5%, and the Nasdaq Composite 0.4%. The small-cap Russell 2000 and S&P Midcap 400 indices rose 0.8% and 0.6% respectively. All the main stock market indexes closed around the upper quarter of their intraday ranges.

Despite the upcoming Fed meeting, the pace of trading increased slightly. Total volume in the NYSE was 6% greater than the previous day’s level, while volume in the Nasdaq edged 1% higher. Market internals in the NYSE were more solid than that of the Nasdaq, which was weighed down by weakness in the Biotech sector. Advancing volume in the NYSE exceeded declining volume by a margin of 3 to 1. The Nasdaq adv/dec volume ratio was positive by less than 3 to 2. This was notable because the Nasdaq has generally been showing a significant amount of relative strength to the S&P and Dow.

In our September 18 commentary, we illustrated how the S&P 500 had run into key resistance of its 20-month simple moving average, a level that has perfectly acted as support and resistance in recent years. In case you missed it, below is a recap of the same chart we analyzed that day:

Fast forwarding four trading days later, the S&P had basically held in a tight, sideways range, right at that pivotal resistance level. The bullish, short-term consolidation of the S&P 500 is shown on the hourly chart below:

With the S&P 500 acting bullish by successfully “undercutting” and holding support of its 20-period exponential moving average on the hourly chart (the beige line on the chart above), odds generally favor a breakout above the high of the past week’s range. But with the 20-month moving average hovering near the current price of the S&P 500, any short-term breakout attempt may feel the pressure of a market that’s testing a momentous area of price resistance. Remember, the longer the time frame of technical analysis, the more substantial the weight of the support or resistance levels. This means a level of resistance on a monthly chart will have more bearing on price than a level of support on an hourly, daily, or even weekly chart. While the S&P 500 could easily bust through its 20-month moving average, we’d be surprised if it did so without first pausing for a substantial pullback, or at least multi-week consolidation. Therefore, use caution when trading any new breakout buy entries right now.

Today, at 2:15 pm ET, the Federal Open Market Committee (FOMC) will announce their latest stance on interest rates and economic policy. A vast majority of economists expect the Fed to leave rates untouched, while also avoiding any verbage on policy that could spook the market. Still, as always, we expect rather volatile and whippy trading action immediately following the afternoon announcement. If the Fed throws any surprises, the typically volatile, post-Fed price action could, of course, turn rather violent. As is standard protocol ahead of any FOMC meeting, we plan to stay on the sidelines today.

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Today’s Watchlist:

There are no new setups in the pre-market today. We plan to lay low ahead of today’s Fed meeting, but will send an Intraday Trade Alert if/when we enter anything new.

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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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Notes:

• No changes to open positions at this time.

• 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 support@morpheustrading.com 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.

Edited by Deron Wagner,
MTG Founder and
Head Trader