The Wagner Daily


Most of the major indices spent the day chopping around in a narrow, sideways range before closing near unchanged levels. However, notable relative weakness among large-cap tech stocks caused the Nasdaq to lag behind. The S&P 500 advanced 0.1%, the Dow Jones Industrial Average was flat, and the Nasdaq Composite slipped 0.3%. The S&P Midcap 400 registered a respectable gain of 0.5%, but the small-cap Russell 2000 edged 0.1% lower. The Nasdaq finished near the bottom quarter of its intraday range. The S&P and Dow settled just above the middle of their ranges.

Total volume in the NYSE declined 7%, while volume in the Nasdaq was on par with the previous day’s level. The slower turnover in the NYSE prevented the S&P from marking another day of “churning.” However, since the Nasdaq showed relative weakness and closed slightly lower, it would have been better if volume had declined in that exchange as well. Overall, yesterday’s price to volume relationship in the broad market was rather inconclusive.

Just two days after our buy entry into S&P Select Energy SPDR (XLE), the ETF has rallied to set a fresh 52-week closing high. Now that XLE has given us a decent profit buffer, we are raising the stop to near the breakeven level, and will trail it even tighter after marking the low of the next pullback in XLE. The energy ETFs are starting to confirm their recent relative strength, and the sector remains positioned to show leadership in the near to intermediate-term. The “percentage change chart” below compares the performance of XLE to the S&P 500 SPDR (SPY) since the start of the new year:

Our other long position, Semiconductor HOLDR (SMH), continues its steady uptrend since breaking out last month. It’s presently trading near its recent highs, and is still well above its 20-day EMA. However, we may now be starting to see institutional rotation out of the tech arena. Yesterday, for example, leading tech stocks like AAPL, PCLN, GOOG, and AMZN all recorded substantial losses. As such, we’ve tightened our stop in SMH today, just to ensure a small gain can still be locked in if further rotation out of tech continues.

Commodities were one of the leading sectors yesterday, causing the gold and silver ETFs to move above the short-term resistance levels discussed in yesterday’s commentary. The opening strength in the precious metals ETFs presented potential buy points for short-term swing trades. However, one potential “gotcha” that could affect the nice pullback in the gold and silver ETFs is the U.S. dollar. On the chart below, notice the PowerShares U.S. Dollar Bull (UUP) has pulled back to near-term support of its 20-day exponential moving average (EMA), after breaking out above resistance of an extended downtrend line last month:

Since commodities often (not always) move in an opposite direction of the dollar, a resumption of the developing uptrend in UUP could have an adverse affect on the recovery attempt in gold and silver, especially if UUP rallies above its December high. Therefore, traders who bought the recent pullback in precious metals ETFs may wish to maintain tight trailing stops, in order to lock in gains if further strength in UUP pressures commodities in the near future. Furthermore, UUP could even be bought above the high of the past three days (above $23), as that would correspond to a breakout above the hourly downtrend line, after coming into support of the 20-day EMA.

Today, traders will be digesting the employment reports that will be announced before the open. The reaction to the unemployment number is likely to be a market mover, so be prepared for high volatility today. Remember, the broad market hasn’t really done much since the first hour of trading on the first day of the new year. Therefore, a negative, unexpected surprise in jobs data has the potential to cause stocks to pull back sharply. “Long” is definitely the right side of the market to be on, but recent price and volume patterns have not been convincing enough to get complacent.

Today’s Watchlist:

There are no new setups in the pre-market. If anything new is entered, we will 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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  • As per the commentary above, both XLE and SMH stops have been tightened. The new XLE stop is just below breakeven, while the new SMH stop locks in a small gain if it breaks below its 10-day moving average.
  • 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