Watching (RTH) for a pullback entry


All five major indices closed in positive territory on Wednesday, with the Nasdaq, S&P 500 and the S&P MidCap 400 all posting gains for the fifth consecutive session. However, the day’s action was void of any serious conviction that would send Bears running for cover. Across the board, gains were modest. Both the S&P 500 and the S&P MidCap 400 led the action by posting gains of 0.3% yesterday. The Dow Jones Industrial Average and the Nasdaq edged higher by 0.2%, while the small-cap Russell 2000 ended the day flat. Yesterday’s activity was typical for a pre-holiday session.

Trade was light for a second consecutive day. Volume fell by 2% on the NYSE, while turnover on the Nasdaq was off by about 1%. Advancing volume outpaced declining volume by a modest 1.4 to 1 on the NYSE and 1.7 to 1 on the Nasdaq. It’s been quite a while since we’ve seen a definitive accumulation or distribution day in the broad market.

The following chart of the Retail HOLDRS ETF (RTH), provides an excellent example of a technical pattern that has proven bullish since the market bottomed in March of 2009. It’s a simple setup….consolidation, followed by a false breakout (generally on strong volume), a retracement and then the actual breakout on strong volume. We will be monitoring RTH for a possible entry should this technical pattern continue to prove accurate.

The Vanguard Information Technology ETF (VGT), has been in consolidation mode for the past twelve trading sessions. A rally back above the December 13th false breakout ($62.25) should provide a potential buying opportunity for VGT.

Recently, there has been a noticeable flow of money into ETFs that have significantly lagged the market over the past year (oil/related, homebuilders, banking, pharmaceuticals, real estate and REITs). This is often a leading indicator that a rally may be nearing exhaustion. It is too early to definitively suggest that the market is about to change trend, but when laggards become leaders, caution is warranted.

Holiday publication schedule: On Friday, December 24, the stock market will be closed for Christmas Day holiday, and The Wagner Daily will not be published that day. Regular publication will resume on Monday, December 27. Warmest wishes for a Merry Christmas, Happy Hanukkah, and Happy Kwanzaa from Morpheus Trading Group. Enjoy this peaceful time with your family and friends.

Today’s Watchlist:

There are no official setups for today. 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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  • Note the adjusted stop price in UNG at 5.42, which is 5 cents below yesterday’s opening 20-minute low.

  • 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.

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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader