The plan for the next 2 days

The broad market kicked off the
holiday-shortened week with another day of solid gains,
as the Dow Jones Industrials
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year. Stocks spent most of the session trading in a narrow, sideways range, but
buying interest during the final ninety minutes once again lifted most sectors
to decent closing gains. As we typically see during strong markets, small cap
stocks led the way higher and the Russell 2000 Index
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S&P Midcap 400 Index
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Nasdaq Composite
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and Dow Jones Industrial Average closed 0.5% higher. Each of the major indices
closed near their intraday highs, a continued sign of institutional support into
the close.

Unlike the prior two days in which turnover increased while
the market rallied, total volume fell in both exchanges yesterday. Volume in the
NYSE declined by 14%, while volume in the Nasdaq was 16% lighter than the
previous day’s level. Despite the drop in activity, advancing volume exceeded
declining volume by a positive ratio of 2 to 1 in both exchanges. As you might
expect, turnover will probably continue to decline as we approach the
Thanksgiving holiday on Thursday. Thanksgiving week historically consists of
reduced trading activity due to traders taking a few days off before the
holiday.

Gold and silver stocks continued to build on last week’s
impressive gains, as Spot Gold gained $5 and closed at a new 17-year high of
more than $490 per ounce. This resulted in another 2.8% surge in the Gold Mining
Index
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Fortunately, we remain long our full position of
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entry, but it may soon be time to take some profits into strength. Spot Gold’s
lack of prior overhead price resistance has enabled it to rally sharply in a
short period of time, but it is likely the commodity will at least pause and
probably correct as it approaches the $500 level within the next few days.
Although $500 is not a magic number that represents any real area of technical
resistance, the number does provide a big level of "psychological resistance."
Retail investors tend to place stops at large, round numbers because they
anticipate resistance at such levels, especially with prices that represent
the next hundred dollar mark ($100, $200, $300, et cetera). As such, the
placement of stop orders at these large, round numbers does indeed create
resistance, which makes the whole expectation of resistance become a
self-fulfilling prophecy. This being the case, you may want to tighten stops on
any gold or silver stocks you are swinging on the long side. As regular
subscribers will note below, we have tightened our stop on GLD as well. We also
plan to sell at least half of our position size into strength if Spot Gold makes
a run at $500 (or $50 for GLD).

As mentioned in yesterday’s Wagner Daily, most of the
major indices are trading at new multi-year highs. A few indices such as the S&P
Midcap 400 Index are even sitting at record highs. The lack of overhead supply
from any prior highs means that odds favor higher stock prices in the
intermediate-term. However, we want to emphasize that the Nasdaq, S&P, and Dow
have each become quite extended away from support of their 20-day moving
averages. As such, it is likely we will soon see a short-term correction either
through consolidation or a price retracement. Just so you are prepared and not
caught off guard, let’s take a quick look at where you can expect the S&P and
Nasdaq to find support in the event of a retracement in the next day or two.
We’ll begin with the daily chart of the S&P 500:

Looking at the chart above, you will notice the blue dotted
horizontal lines above that indicate new support from the prior highs. This area
would be the first place where the S&P could drop to before it recovers to
resume the uptrend. But if the 1,243 level is broken, look to the 10-day moving
average for support (currently at 1,234). In steadily trending markets, the
10-day MA works great at preventing you from prematurely exiting a winning
position. As long as the stock or ETF remains above the 10-day MA, being long is
usually the right thing to do.

Just like the S&P, the Nasdaq is at a four-year high that
provides no overhead resistance. Short-term support is the prior highs from
August, with the 10-day MA providing further support below that. Take a look at
the daily chart of the Nasdaq below:

Remember that the U.S. equities markets will be closed this
Thursday, November 24, for the Thanksgiving holiday. The next two days leading
up to that will probably consist of reduced volume and the increased chop and
indecision that usually accompanies a drop in turnover levels. Don’t overtrade
this week and consider focusing on your existing positions right now rather than
entering new ones.

Open ETF positions: