Watching for a bounce in the Japanese Yen ETF (FXY)


Stocks opened slightly lower yesterday, grinded back to the flat line by mid-day, rallied into moderately positive territory in the afternoon, then drifted off their highs into the close. By day’s end, the major indices had settled flat to modestly higher. The Nasdaq Composite rose 0.3%, the S&P 500 advanced 0.2%, and the Dow Jones Industrial Average was unchanged. The small-cap Russell 2000 gained 0.6% and the S&P Midcap 400 Index finished 0.5% higher. The main stock market indexes settled near the upper quarter of their intraday highs. With the exception of the Dow, all the major indices registered another round of new 52-week highs.

Total volume in both the NYSE and Nasdaq was approximately 4% greater than the previous day’s levels, but remained below 50-day average levels in both exchanges. Since the Dow was flat, but NYSE volume was higher, yesterday’s volume pattern in the NYSE may have been indicative of “churning,” a stealth attempt at institutional selling into strength. The Nasdaq technically had a bullish “accumulation day,” though neither the small percentage price gain or volume increase was overly convincing of buying amongst mutual funds, hedge funds, and other institutions.

As the U.S. Dollar Bull Index (UUP) continues to trade near its recent highs, the CurrencyShares Japanese Yen (FXY) has broken down below key support of a long-term uptrend line. This is shown on the weekly chart below:


When FXY fell below support of its 18-month uptrend line two weeks ago and failed to immediately recover, that prior support became the new resistance level. As such, a bounce that approaches resistance of the prior uptrend line could present an ideal entry point for a new short position. In the coming days, we’ll be monitoring FXY for a potential rally to the $108 to $108.50 area.

As anticipated, the financial ETFs have again grabbed the reigns of leadership in the market’s latest attempt to make another leg higher. The financial sector showed the most relative strength during the March rally, and the industry appears to be picking up where it left off. In particular, regional banking seems to be logging the biggest gains. Yesterday, the Regional Bank HOLDR (RKH) surged 2.0%, to another new 52-week high. Next, we are looking for a breakout in the securities broker-dealer sub-sector. After perfectly bouncing off support of its 20-day exponential moving average, our long position in iShares U.S. Broker-Dealers Index (IAI) is starting to look pretty good. A rally above yesterday’s high should send IAI into another uptrend, building on the gains from the first half of March. The daily chart is shown below:


Now that the major indices have broken out above the highs of their multi-week trading ranges, without pulling back first, this may be a good time to consider raising protective stops on any broad-based ETFs you’ve been holding. The breakout levels of two days ago should now act as support on a pullback, so a new stop just below those levels may be ideal for some traders. In the ETF Portfolio Tracker, our ETF newsletter that focuses on longer-term holding times, we just raised used the same analysis to tighten the stop in S&P Midcap SPDR (MDY). As such, we’re now able to quickly lock in gains near the highs, in the event of a pullback, while allowing profits to ride as long as the bullishness continues. The stop placement in MDY is shown on the daily chart below:


Granted, the market has not yet exhibited any significant signs of weakness or an impending pullback, but we would humbly like to remind subscribers that markets do indeed still go both up and down. Sometimes, as is presently the case, markets can persist in a trend for a surprising length of time, but the retracement will eventually come, often when the least number of market participants expect it. Realize that we are certainly NOT trying to call a top; rather, we are merely reminding you not to become complacent with winning positions.

Today’s Watchlist:

There are no new setups in the pre-market today, as we now have five open positions. We’ll focus on managing these positions for maximum profitability and minimal risk this week. 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.

    position summary

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  • No changes to our open positions at this time. However, we’ll be watching closely for any signs of significant weakness, at which point we will look to tighten individual stops as necessary.
  • 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