Time to Recover? – (EDZ) (XLK)


Stocks snapped a three day losing streak, as they closed modestly higher on Thursday. However, trade was light. The major indices all closed in the black. The small-cap Russell 2000 showed the most strength on the session, as it tacked on 1.1%. The S&P MidCap 400 added 0.8%, while the S&P 500 and the Dow Jones Industrial Average improved by 0.3% and 0.4% respectively. As has been common lately, the Nasdaq struggled, as it ended the day just above break even.

Market internals were mixed on Thursday. Volume fell on the Nasdaq by 2.4% and on the NYSE by 9.8%. On the NYSE advancing volume outpaced declining volume by a ratio of 1.7 to 1. However, on the NYSE, advancing volume finished at par with declining volume. The light volume casts a shadow over yesterday’s positive price action and points to an absence of institutional participation in the day’s action.

On December 12th, on a massive spike in volume, the S&P Select Technology SPDR ETF (XLK) gapped down and tested support at its 20-day EMA. On December 13th, XLK formed a bearish engulfing pattern and closed at session lows, just below support of the 50-day MA. Over the past two sessions this ETF has been consolidating at its two day lows, below support of its 200-day MA. A volume fueled move below the two day low of $24.99 could provide a short selling opportunity in this ETF.

Over the past four trading sessions, the Direxion Daily Emerging Marktes Bear 3X Shares (EDZ) has worked its way back above all of its key moving averages. Further, EDZ in now positioned just above the downtrend line and has been consolidating above this level for the past two days. Also notice the bullish divergence between the price the recent action and the Accumulation-Distribution indicator. A move above the two day high of $22.33 could provide a buying opportunity in this ETF. We are placing EDZ on the watchlist. Trade details are available to our clients in the watchlist segment of the newsletter.

The market continues to struggle to find any positive momentum. Despite the move higher, yesterday’s action was far from impressive. If the market doesn’t recover from the current levels quickly, another precipitous fall may be in store.

Today’s Watchlist:


Shares = 150
Trigger = 22.38
Stop = 19.78
Target = new swing high
Dividend Date = n/a

Notes = see commentary above

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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  • We raised the stop in AGA to break-even.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader