--> Weakness In NASDAQ and S&P 500 Shifts Timing System To Neutral

Weakness In NASDAQ and S&P 500 Shifts Timing System To Neutral

market timing model: NEUTRAL

 Current signal generated on close of January 24.

Portfolio exposure can be anywhere from 30% to 100% long, depending on how open positions held up last week.

Past signals:

    • Buy signal generated on close of November 13
    • Buy signal generated on close of September 9
    • Neutral signal generated on close of August 15
    • Buy signal generated on close of July 11
    • Neutral signal generated on close of July 5
    • Sell signal generated on close of June 24

 (click here for more details) 

today’s watchlist (potential trade entries):

$todays watchlist
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open positions:

Below is an overview of all open positions, as well as a report on all positions that were closed only since the previous day’s newsletter. Changes to open positions since the previous report are listed in pink shaded cells below. Be sure to read the Wagner Daily subscriber guide for important, automatic rules on trade entries and exits.

$todays watchlist
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closed positions:

open position summary
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ETF position notes:

  • Stopped out of $PIZ, $GWL, $TAN, and $GREK. For those who still own $TAN, you may want to set a stop at 36.79.

stock position notes:

  • Stopped out of $ARMK.


ETF, stock, and broad market commentary:

Stocks were hit hard on Friday, with all major averages averages closing at least -2.0% lower on heavy volume. The heavy volume selling produced back to back distribution days in the S&P 500 and Nasdaq Composite.

With the S&P 500 slicing through support at the 50-day MA and the distribution days beginning to mount, our timing model is forced into neutral. Over the next few days we’d like to hold off on establishing new positions and see how stocks react to last week’s distribution. That being said, there is no concrete rule stating that we can not buy an A rated stock on a pullback (while we are in neutral), if a low-risk entry point presents itself.

When we developed our rule based timing model, the idea wasn’t to prevent us from being flexible, but to keep us from making costly mistakes. For example, establishing 4 to 5 new long positions, while the major averages are still below the 20-period EMA on the hourly chart is dangerous. But taking on 1 or 2 positions with reduced size while the market begins to settle down is fine. Again, we want to be rules based, but remain flexible.

The Nasdaq Composite is still above the rising 50-day MA.

$qqq SELLING

There is support from prior base highs and the rising 50-day MA in the $4,050 – $4,100 area. The price action could easily undercut this level during the week and bounce higher from short-term oversold conditions.

The S&P 500 is in bad shape with an ugly breakdown below the 50-day MA last Friday. There is a cluster of support around $176, which is where we could expect some sort of relief bounce from short-term oversold conditions.

$SPY DISTRIBUTION DAY

Market conditions have quickly turned sour, but we’d like to see more confirmation before we remove most (if not all) long exposure and focus on the short side.

For example, if the Nasdaq Composite and Russell 2000 follow the S&P 500 below the 50-day MA, then our timing model will be forced into sell mode. If most of our existing positions begin to melt through obvious support levels, then that would be further confirmation the market is ready to reverse. We want to avoid the short side until this happens, as there will be plenty of time for low-risk shorting if/when the market eventually breaks down.

On the stock side, $SYNA reacted positively to earnings, moving to a new swing high despite horrible market conditions. If the price action holds up well, we will stick with the position no matter what the market does.

$SYNA post earnings gap up

We have tightened up the stops on our non A rated stocks. We also have a tight stop in $TWTR because of earnings on 2/5. If the price action reverses, then we would rather be out. If it moves up into earnings, then we will sell into strength. If it just treads water into the report we will also sell. Bottom line is we do not want to hold $TWTR through earnings right now.

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