The Trend Is Your Friend


Stocks fell sharply on Monday on marginally lighter trade. Stocks were under pressure the entire session as they opened at session highs and closed near session lows. The S&P 500 was unable to hold support at the key 1294.7 level. The S&P’s failure to hold this key mark does not bode well for market bulls as it resulted in the index setting its first lower-low in almost a year. As has become common lately, all five major indices closed in the red. Higher beta stocks got hammered as the small-cap Russell 2000, S&P MidCap 400 and Nasdaq shed 1.5%, 1.5% and 1.1% respectively. The S&P 500 also shed 1.1% while the Dow Jones Industrial Average contained losses as it dropped a modest 0.5% on the session.

Market internals ended the day mixed. Volume was modestly lower across the board but for the second time in three days, declining volume overwhelmed advancing volume by a wide margin. Further, only a handful of industry groups managed to avoid the relentless selling. Turnover fell on the Nasdaq by 3.2% and on the NYSE by 0.8%. On the NYSE the spread ratio ended the session at 14 to 1 in favor of declining volume. The Nasdaq saw this key technical ratio end the session at 4 to 1 in favor of declining volume. Although volume was lighter, we would be hard pressed not to consider the effects of Monday’s session as market distribution.

Yesterday we covered our short position in GDX netting almost a two point gain. Via intraday alert we also entered a new long position in the ProShares UltraShort MSCI Emerging Markets ETF (EEV). After pulling back and undercutting its 20-day EMA and 50-day MA, EEV spent the last three sessions consolidating between these moving averages. Yesterday, on a pickup in volume EEV broke above the three day trading range and we entered the trade. For our subscribing members full details of this trade can be found in the open positions section of the newsletter.

In yesterday’s newsletter we discussed the importance of the S&P 500 holding support at the 1,294.70 mark. With yesterday’s selloff, the S&P lost support of this key level and as a result a “lower, low” has been established. This is a very important technical signal as it suggests that the broad market may be in the midst of a trend change. The recent trendline break further supports this view.

Now that the S&P 500 has established a lower-low, we are even more convinced that a correction is at hand. It appears likely that this broad market index is now headed for its 200-day moving average.

Today’s Watchlist:

There are no new setups this morning. As always, we will send an Intraday Alert if any new trades are made.

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

    position summary

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  • Per intraday alert, we bought EEV and sold GDX to lock in gains.

  • 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