The Wagner Daily


Pressured by an overnight jump in the U.S. dollar, stocks opened moderately lower yesterday morning. However, the major indices quickly stabilized, then merely drifted sideways to slightly lower throughout the rest of the day. Both the S&P 500 and Dow Jones Industrial Average finished 0.5% lower. The Nasdaq Composite lost 0.7%. The small-cap Russell 2000 and S&P Midcap 400 indices declined 1.0% and 0.8% respectively. The main stock market indexes finished around the bottom quarter of their intraday ranges.

Total volume in the NYSE rose 4% above the previous day’s level, while volume in the Nasdaq eased 1%. The higher volume loss in the NYSE technically caused the S&P 500 to register a bearish “distribution day.” Still, the preceding day was marked by late-day institutional accumulation. In both exchanges, turnover remained below 50-day average levels. Market internals were only slightly negative. In the NYSE and Nasdaq, declining volume marginally exceeded advancing volume.

As anticipated, the U.S. Dollar Bull Index (UUP) gapped above resistance of its February 2010 high yesterday, and should begin making another leg higher. The strengthening U.S. dollar has begun pressuring the prices of many commodities, which frequently move inversely to the direction of the dollar. Yesterday, SPDR Gold Trust (GLD), which tracks the price of the spot gold commodity, gapped down below short-term horizontal price support. This is shown on the daily chart below:

On the daily chart, it looks as though GLD has merely been in a choppy, sideways range for the past several months. However, the longer-term weekly chart shows that GLD is in danger of breaking below key support of its long-term uptrend line, which will occur if it convincingly falls below yesterday’s low. The weekly chart of GLD is shown below:

One way to take advantage of a bearish reversal in gold is through selling short GLD. But another way is to buy the leveraged, inversely correlated Gold Double Short ETN (DZZ). Notice the daily chart of DZZ is basically the same as the daily chart of GLD turned upside down:

As with all leveraged, inversely-correlated ETFs, DZZ may underperform the actual spot gold commodity over the long-term. However, over the short to intermediate-term, it has been tracking pretty closely to the actual index it’s supposed to follow. Regular subscribers should note our detailed trigger, stop, and target prices for the DZZ setup in “today’s watchlist” below.

The iShares 7-10 Year T-Bond Index (IEF), which we were monitoring for potential buy entry on a breakout above its 200-day MA, sold off sharply yesterday. So did the rest of the fixed-income ETFs. Since it did not trigger for buy entry, no harm was done, but IEF is now being removed from our watchlist. The iShares Xinhua China 25 Index (FXI) remains on our watchist for potential buy entry on a breakout above its four-month downtrend line.

Today’s Watchlist:

Gold Double Short (DZZ)

Shares = 300
Trigger =$14.33 (above yesterday’s high)
Stop = $12.69 (below support of the March 3 low)
Target = $17.30 (resistance of Oct. 2009 high)
Dividend Date = n/a

Notes = See commentary above for explanation of the setup.

iShares Xinhua China 25 Index (FXI)

Shares = 300
Trigger = HALF at $41.52, HALF at $42.01 (above the March 19 high, then above the March 17 high)
Stop = $39.74 (below the 50-day MA and recent consolidation)
Target = $46.30 (test of 52-week high from November 2009)
Dividend Date = n/a

Notes = This setup from March 22 did not yet trigger, but remains on our watchlist going into today. Note the adjusted trigger price for the first half of trade entry. See commentary in our March 22 issue for explanation of the trade setup. Note that we will be scaling into this position, initially buying 150 shares at first trigger point, then adding 150 shares at second trigger. Stop is the same for full position.

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 sold short BRF yesterday. Like our recent XME trade, this is intended to be a very short-term trade that takes advantage of the growing relative weakness in BRF, which apparently is having trouble holding above its 50-day moving average. UUP gapped up to new high yesterday, as it rallies on the way to our price target.
  • 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