Limiting the stock market's recent price correction to just two days, the major indices raced higher yesterday, scoring their biggest gains in months. Stocks gapped several percent higher on the open, trended north throughout the morning, consolidated for a few hours, then made another huge advance in the afternoon. The S&P 500 rocketed 7.1% higher, its largest one-day gain since last October 28, when the index advanced more than 10%. The Nasdaq Composite and Dow Jones Industrial Average posted identical gains of 6.8%. Small-caps again took center stage, as the Russell 2000 zoomed 8.4% higher. The S&P Midcap 400 climbed 7.4%. All the main stock market indexes closed at their best levels of the day, indicating no signs of intraday "profit taking" into the close.

Despite the monstrous rally, lower turnover across the board was a disappointment. Total volume in the NYSE declined 22%, while volume in the Nasdaq was 13% lighter than the previous day's level. Considering the humongous percentage gains in the broad market, one might have expected the power of institutional buying activity (reflected by higher volume) to accompany the rally, but mutual funds and hedge funds appeared to be somewhat on the sidelines. Nevertheless, one should also keep in context that the prior day's volume levels were largely inflated by the "quadruple witching" options expiration. Lighter volume notwithstanding, other market internals were quite strong. In the NYSE, advancing volume destroyed declining volume by a margin of 35 to 1. The Nasdaq adv/dec volume ratio was positive by 15 to 1. These extremely positive readings tell us practically every industry sector participated in yesterday's rally, not only the beaten-down financials.

Just before yesterday's close, we sent an Intraday Trade Alert to subscribers of The Wagner Daily, informing them we were taking profits on Ultra QQQ ProShares (QLD), which we had been long since March 17. At the time of entry, our original price target was just over the $28 area, which QLD approached in the final minutes of trading. Given the huge intraday rally, it made sense to sell into strength, near the area of our price target. Upon doing so, we locked in a gain of just over 16% (4 points). The entry and exit price of our QLD trade is shown on the daily chart below:

The buy setup in Internet HOLDR (HHH), which we illustrated in yesterday's commentary, triggered for entry. As per the plan, we bought HHH when it rallied above the high of its horizontal price resistance. Presently, the trade is showing an unrealized gain of just under one point. The breakout in HHH is shown on the daily chart below:

In yesterday's newsletter, we illustrated the intermediate-term downtrend lines in the S&P 500, Nasdaq Composite, and Dow Jones Industrials, which were anchored with last week's highs. Since yesterday's gains obviously caused the main stock market indexes to rip through last week's highs, the major indices have technically transitioned into new intermediate-term uptrends. Further, all five of the main stock market indexes we monitor have moved back above their 50-day moving averages, an intermediate-term trend indicator that is closely watched by institutions. Look for the 50-day moving averages to act as support on any subsequent pullbacks this week.

Even though the short and intermediate-term trends are now bullish, it's important to remember the long-term trends are still "down." The main stock market indexes would have to rally much higher to even have a shot at reversing the long-term downtrends, which have been in effect for more nearly a year and a half. Therefore, in the back of your mind, stay mentally prepared for the fact that, perhaps in the not-too-distant future, the dominant long-term downtrends could eventually pressure the intermediate-term trends enough to force us to abandon long positions and jump back onto the short side of the market. But until that happens, let's take advantage of the developing opportunities that are starting to present themselves on the buy side.

Open positions (coming into today):


UGA long (175 shares from March 4 entry) - bought 23.41, stop 20.49, target 31.30, unrealized points = + 2.37, unrealized P/L = + $415

USO long (150 shares from March 17 entry) - bought 29.08, stop 25.18, target 38.70, unrealized points = + 2.70, unrealized P/L = + $405

HHH long (200 shares from March 23 entry) - bought 35.25, stop 32.49, target 41.80, unrealized points = + 0.92, unrealized P/L = + $184

SLV long (400 shares from March 5 entry) - bought 13.14, stop 11.69, target 16.35, unrealized points = + 0.32, unrealized P/L = + $128


Closed positions (since last report):


QLD long (350 shares from March 17 entry) - bought 23.97, sold 27.92, points = + 3.95, net P/L = + $1,376


Current equity exposure ($100,000 max. buying power):


$21,897

Notes:


• Per Intraday Trade Alert, we sold QLD into strength, just before the close, as it neared our original price target.
  
  
• The HHH buy setup triggered, as per the parameters in yesterday's Wagner Daily.
  
  
• 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 support@morpheustrading.com if not already set up for this value-added feature we provide to subscribers.
  
  
  
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