The Wagner Daily


The bulls remained in control ahead of the Christmas weekend, as stocks logged their fifth consecutive day of gains last Thursday. The main stock market indexes also finished at new closing highs of 2009. The Nasdaq Composite gained 0.7%. The S&P 500, Dow Jones Industrial Average, small-cap Russell 2000, and S&P Midcap 400 indices all advanced 0.5%. Each of the major indices closed near its intraday high.

Because the trading session closed three hours early, volume was obviously much lighter than the previous day’s levels. Turnover in both the NYSE and Nasdaq declined 59%. But even after adjusting for the early closing time, both exchanges still would have been on pace for the lightest volume day of the year. With the week between Christmas and New Year’s Day typically being the slowest week of the year, trading is unfortunately likely to remain lethargic for at least the next four days.

In the December 23 issue of The Wagner Daily, we pointed out the pullback in SPDR Gold Trust (GLD), which was coming into support of its weekly uptrend line. In the two days that followed, GLD moved higher, and is now poised to reclaim its 50-day moving average. If it does, GLD could start making its way back to the prior high. A related ETF to keep on your radar screen is Market Vectors Gold Miners (GDX), which is bouncing off support of its weekly uptrending channel. Take a look:

Last week, the CBOE Volatility Index ($VIX), also known as the “fear indicator,” dropped below 20 for the first time since August of 2008:

Since markets typically correct when investors have the least amount of fear, a reading below the 20 level indicates a high level of complacency. Though we would never base our trading decisions solely on the level of the $VIX, it has been a reliable indicator for keeping the degree of a market’s trend in perspective. Obviously, there’s no assurance the $VIX won’t continue even lower in the near-term, but the current reading of 19.46 gives us sufficient reason to be very careful on the long side of the market.

After trading in a choppy, sideways range for six weeks, the S&P 500 finally broke out above the high of its recent consolidation last Thursday. This is shown on the daily chart of the S&P 500 below:

Curiously, the breakout above the range occurred on a shortened session that was the lightest volume day of 2009. While this certainly doesn’t mean the breakout was not legitimate, it nevertheless gives us substantial cause for suspicion. When breakouts above obvious resistance levels occur on extremely light volume, they often fail to hold up. Unfortunately, with trading expected to remain light for the next week, we probably won’t see the real intentions of mutual funds, hedge funds, and other institutions until after the new year.

Today’s Watchlist:

There are no new setups in the pre-market today. If we enter anything new, 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.

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  • Because EEV and FAZ closed within pennies of their stop prices, we’re using the MTG Opening Gap Rules to manage the positions on the open. New stops in both ETFs will be either their original stop prices (listed above) OR 15 cents below their lows of the first 20 minutes, whichever is lower. If any stop adjustments are made after the open, we’ll send an alert confirming the updated stop prices.
  • 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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Edited by Deron Wagner,
MTG Founder and Head Trader