Commentary:
The month of August concluded in uneventful fashion, as the major indices spent the day chopping around indecisively before calling it a draw between the bulls and bears. After opening substantially lower, stocks promptly reversed into positive territory, but afternoon selling pressure held the market’s intraday rally attempt in check. The S&P 500, Dow Jones Industrial Average, small-cap Russell 2000, and S&P Midcap 400 were all unchanged. The Nasdaq Composite slipped 0.3%. The main stock market indexes settled near the middle of their intraday ranges, further confirming the lack of direction in yesterday’s session.
Volume surged across the board, as mutual funds, hedge funds, and other institutions made month-end adjustments to their portfolios. Total volume in the NYSE jumped 71%, while volume in the Nasdaq rose 32% above the previous day’s level. Turnover in both exchanges moved back above 50-day average levels. When at the upper channel of an extended uptrend, minimally changed prices on higher volume is known as “churning,” a bearish scenario caused by institutional selling into strength near the highs. Conversely, a higher volume session with flat price action near the lows of a downtrend is often bullish, as it shows prices are refusing to go lower, despite the abundance of supply.
The basic rule of relative strength trading is stocks and ETFs that do not move lower when the broad market does are typically the first equities to surge higher when the major indices eventually bounce. Since the U.S. markets trended lower throughout the entirety of last month, ETFs still holding at or near their highs are potential buy candidates that will likely zoom higher when the broad market starts finding support and moving higher again (remember, the major indices are still in an extended, sideways range). Therefore, before the market starts ripping higher again, now is a good time to start building a fresh watchlist of ETFs with relative strength, in order to be prepared for fresh buying opportunities if they arise.
Of the various types of ETFs on the market, select international ETFs were among the top performers in August. Several ETFs in this group showed significant relative strength by either consolidating in a sideways range, near their highs, or even trending higher, while the domestic markets sold off. One such ETF that may trigger for buy entry in the coming days is iShares Turkey Index (TUR). The setup is shown on the daily chart below:
As the S&P, Nasdaq, and Dow trade below their 20, 50, and 200-day moving averages, near their July lows, TUR consolidates near its recent highs, above all three of those moving averages. Last week, notice TUR successfully tested support of its 50-day moving average (the teal line), and is now holding above its 20-day exponential moving average (the beige line) as well. The blue dotted line annotated on the chart above marks resistance of the short-term downtrend line from the August high. A rally above that level, above the 3-day high, is our buy entry point into TUR. With a little help from a bounce in the U.S. markets, TUR should break out to a fresh, all-time high shortly thereafter. On “Today’s Watchlist” below, regular subscribers should note our detailed trigger, stop, and target prices for the TUR setup.
Another international ETF to consider for potential buy entry is Market Vectors Indonesia (IDX). For the past two months, IDX has been consolidating in a sideways range, near its all-time high. The weekly chart of IDX below illustrates this:
Zooming into the daily timeframe, we see IDX pulled back to support of its 50-day moving average on August 30, then held above that level yesterday. Take a look:
As shown with IDX above, we always analyze both the daily and weekly timeframes of ETFs. The weekly chart shows the “big picture” of the trend, and removes the “noise” from the shorter-term daily chart. However, the daily chart is necessary in order to fine tune an entry point for an ETF that looks good on the weekly chart. In this case, we like IDX for potential buy entry on a rally above yesterday’s high, as that would put the ETF back above its 20-day EMA, after bouncing off its 50-day MA a few days prior. A breakout to a new all-time high could follow thereafter, assuming the U.S. markets at least cooperate.
Today’s Watchlist:
iShares Turkey Index (TUR)
Long
Shares = 150
Trigger = $61.30 (above the three-day high)
Stop = $57.35 (below the late August “swing low” and 50-day MA)
Target = new high (will trail stop)
Dividend Date = n/a
Notes = See commentary above for explanation of the setup.
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 SLV buy setup did not trigger for entry, and has been temporarily removed from our watchlist.
- We have raised the UUP stop to near the break-even level, just below support of the 200-day MA and low of the August 11 gap up.
- 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