The Wagner Daily


Failing to immediately follow through on the previous afternoon’s weakness, the major indices meandered through yesterday’s listless session before finishing with mixed results. Stocks opened flat, then chopped around in a sideways range throughout the entire day. Showing a bit of relative strength for a change, the Dow Jones Industrial Average gained 0.4%. The Nasdaq Composite edged 0.1% higher and the S&P 500 slipped less than 0.1%. The small-cap Russell 2000 and S&P Midcap 400 indices lost 0.3% and 0.4% respectively. The Dow finished near its high of the day. The Russell and S&P Midcap indices closed near their lows.

Turnover eased across the board. Total volume in the NYSE was 9% lighter than the previous day’s level, while volume in the Nasdaq receded 6%. In both exchanges, volume registered below average levels for the sixth consecutive day. In the NYSE, declining volume exceeded advancing volume by a margin of 2 to 1. In the Nasdaq, advancing volume was on par with declining volume.

Select fixed-income (bond) ETFs have started to form interesting patterns that may soon present ideal buy entry points. Specifically, we like the formation on the daily chart of iShares 7-10 year T-Bond (IEF), shown below:

The chart above shows IEF is positioned for a bullish trend reversal in the near-term. It has just completed the right shoulder of an “inverse head and shoulders” pattern, which is bullish if the price follows through to break out above the high of the neckline. Conveniently, resistance of the 200-day moving average converges with the neckline as well. This convergence should increase the upside momentum of a breakout. As for entry, we plan to buy IEF if it rallies above its March 17 high of $90.63. Such a move would cause IEF to break through its 200-day MA, neckline, and a significant area of horizontal price resistance. Substantial monthly dividend distributions are an added benefit to intermediate and long-term investments into IEF. On the longer-term weekly chart below, notice that IEF is also poised to break out above resistance of a downtrend line that’s been in place for more than a year:

In yesterday’s commentary, we illustrated the buy setup in U.S. Dollar Bull Index (UUP), which had pulled back to support of its 50-day moving average. On the open, UUP triggered our buy entry, then trended higher throughout the morning. UUP pulled back slightly in the afternoon, but still gained 0.7% for the day, a sizeable one-day advance for a currency ETF. Closing above its 20-day EMA and hourly downtrend line, UUP is apparently on the way to resuming its dominant uptrend. So far, UUP is acting in the same manner as the last time it retraced to support of its 50-day MA, two months ago. Separately, we closed our position in Market Vectors Gold Miners (GDX) for a scratch. Having trouble with resistance of the $47 area, we made a judgment call to sell GDX at the breakeven level, when it fell below the previous day’s low. Conversely, our short position in S&P Metals and Mining SPDR (XME) turned in a nice performance yesterday. Showing major relative weakness, XME fell 2.3% yesterday, giving the short position a solid unrealized gain one day after entry. Again, this is a very short-term, counter-trend trade, seeking to take advantage of an anticipated pullback in the sector. On the chart below, notice how Wednesday’s “shooting star” candlestick preceded yesterday’s sharp decline:

Today is quarterly “quadruple witching” options expiration, the day on which contracts for stock index futures, stock index options, stock options, and single stock futures (SSF) simultaneously expire. Because traders are focused on moving stocks to close near their preferred strike prices, quadruple witching days are typically erratic and choppy, especially in the late afternoon. As such, we generally avoid new trade entries on quadruple witching days, preferring to wait to the following Monday instead. Our plan in today’s session is to patiently sit on the sidelines, maintaining existing stops on open positions, while paying attention to price action for potential trading opportunities next week.

Today’s Watchlist:

There are no new setups in the pre-market today. As explained above, we prefer to avoid new trade entries on “quadruple witching” days. However, we continue to maintain our “pullback watch list” of strong ETFs. Also, we will “officially” list IEF on our watchlist next week.

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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  • Per Intraday Trade Alert, we tightened the stop of GDX, which subsequently triggered. We closed GDX for a scratch.
  • Our pre-market setup in UUP triggered for buy entry yesterday.
  • 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