The Wagner Daily


After three days of narrow-ranged, horizontal trading, the major indices gapped sharply higher to close the week at the highest levels since their early February lows. Sparked by a positive reaction to pre-market employment data, stocks jumped out the starting gate, built on their gains through the first hour of trading, then consolidated near their intraday highs throughout the rest of the session. The Nasdaq Composite climbed 1.5%, the S&P 500 1.4%, and the Dow Jones Industrial Average 1.2%. The small-cap Russell 2000 and S&P Midcap 400 indices advanced 2.1% and 1.5% respectively. Each of the main stock market indexes settled at its highest level of the day and week.

Volume rose across the board, enabling both the S&P and Nasdaq to score a bullish “accumulation day,” indicative of buying amongst mutual funds, hedge funds, and other institutions. Total volume in the NYSE was 13% greater than the previous day’s level, while turnover in the Nasdaq similarly rose 11%. However, despite the increased pace of trading, total volume in the NYSE remained below its 50-day average level. Market breadth in both exchanges was quite strong. In the NYSE, advancing volume crushed declining volume by a margin of nearly 12 to 1. The Nasdaq adv/dec volume ratio was positive by more than 5 to 1.

After a weak start to 2010, stocks found support in early February, then subsequently began working to recover the lost ground. It’s now been a month that the major indices have been trending higher, off their recent lows. So far, both the price and volume patterns have not yet exhibited signs of bearishness. However, now that the rest of the major indices are catching up to the breakouts in small and mid-caps, the more closely-watched S&P, Nasdaq, and Dow will soon be testing resistance of their January 2010 highs. As they do, one should be prepared for a bit of turbulence and volatility. The areas of possible contention are annotated on daily charts of the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average below:

This week, traders and investors who bought at stocks at their January highs, and didn’t quickly sell thereafter, may be looking to exit long positions into strength. Though it is never advisable for professionals to think in such a way, amateur retail investors often sell at levels “just to break even.” This is called overhead supply, which is the reason that technical resistance levels are created. IF the S&P, Nasdaq, and Dow are destined to head back down, resuming the weakness they encountered at the beginning of the year, the January 2010 highs is the logical area where sentiment could start to change.

Obviously, the indices could blast right through their January highs, as the Russell and S&P Midcap indexes recently did. But a more likely scenario is that stocks will first encounter a bit of a pullback, or at least a “shakeout.” As such, we’re now monitoring our long positions closely, and will be taking a more pro-active stance to position management, just because of the anticipated volatility around the January 2010 highs. This means we may sell winning positions into strength of a sharp move higher and/or trail tighter stops at any onset of weakness. This further quantifies our March 5 commentary, where we specifically said, “If the S&P, Nasdaq, and Dow surge above their three-day highs today, those indexes could soon join the Russell and S&P Midcap at moving back to their January 2010 highs. But at that point, we would actually consider lightening up and/or tightening stops on long positions.” So far, all three of our long positions are looking good. If necessary, we’ll keep subscribers updated of any stop changes via Intraday Trade Alerts.

Today’s Watchlist:

There are no new setups in the pre-market today.

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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  • For now, we are keeping the same stops on our open positions. However, they will be monitored closely as the broad market approaches key resistance of its January 2010 highs. If any changes are made intraday, we will promptly send an alert with details.
  • 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