Commentary:
Stocks opened moderately higher yesterday morning, then meandered in a sideways range throughout the day. Closing near the middle of its past week’s trading range, the S&P 500 rose 0.6%. The Nasdaq Composite and Dow Jones Industrial Average registered identical gains of 0.4%. The small-cap Russell 2000 and S&P Midcap 400 indices advanced 0.5% and 0.8% respectively. All the main stock market indexes finished around the midpoint of their intraday ranges.
Volume levels continued to decrease, as more traders moved to the sidelines ahead of the upcoming holiday weekend. Total volume in the NYSE was 8% lighter than the previous day’s level, while volume in the Nasaq declined 16%. Like the previous day, turnover was below 50-day average levels. Market internals improved slightly, but were still unimpressive. In the NYSE, advancing volume exceeded declining volume by a margin of approximately 2 to 1. The Nasadaq adv/dec volume ratio was positive by 3 to 2.
Despite the bearish “shooting star” candlestick patterns that formed on the charts of the major indices on March 25, stocks have yet to follow through with a substantial downside correction. But since upside momentum has also been absent, it’s starting to look more and more like the main stock market indexes will merely correct by time, rather than price. In overly bullish environments, stocks will often trade in a tight, sideways range, enabling the short-term moving averages to rise up and provide support, rather than the major indices actually pulling back to meet those moving averages. As such, we continue to see very little in the way of ideal ETF trade setups correlated to the broad market. The consolidation on the daily chart of iShares Real Estate Index (IYR) is a good example of a “correction by time:”
<.p>For short-term traders looking to take advantage of a quick, mid-trend “pop” in strongly trending ETFs, there are a few possible setups that are buyable on the breakout above the hourly downtrend line.. One is Ultra Semiconductors ProShares (USD). The daily chart below shows the overall trend, while the shorter-term hourly chart that follows illustrates a potential entry point for a quick trade:
The iShares Healthcare Providers (IHF) is a similar setup, which is buyable for a short-term move above yesterday’s high. Take a look:
A mid-trend entry for quick, short-term traders may be found in iShares Thailand Index (THD), which has shown great relative strength this month, but is now in short-term pullback mode. Take a look at the daily chart of THD below:
If THD rallies above yesterday’s high, it will move above its 20-EMA on the hourly chart as well. This would trigger a valid entry for a short-term, mid-trend pullback entry. However, if buying while THD is still well above its 20-day EMA, a tight protective stop may be a good idea. Exiting the trade on a reversal below yesterday’s low would minimize risk, while providing traders with a potentially better entry point in the near-term.
We presently have four open positions, each of which is showing an unrealized gain. Those positions are U.S. Dollar Bull Index (UUP), iShares Xinhua China 25 Index (FXI), ProShares UltraShort 20+ Year T-bond (TBT), and a short position in Market Vectors Brazil Small Cap (BRF). As such, we are not aggressively looking to enter new trades right now. We probably won’t buy any of the trade setups above, if the trigger for entry, but just wanted to pass the information on to subscribers who may be short-term traders. Our portfolio now has a low correlation to the direction of the broad market, which is ideal during sideways, range-bound periods.
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.
- The second half of FXI triggered for buy entry at $41.60 yesterday. New average price on full position size reflected above.
- 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.
Having trouble seeing the position summary graphic above?
Click here to view it directly on your Internet browser instead.
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader