The Wagner Daily - January 11, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks ended the day mixed on light volume. For the second consecutive day it appeared that the market might fall into a tailspin. However, stocks mounted a recovery within the first hour of trading and rallied into the close. Despite the light trade, technology issues fared well. The S&P MidCap 400 led all major indices as it posted a healthy 0.6% gain on Monday. The small-cap Russell 2000 and Nasdaq closed higher by 0.5% and 0.2% respectively. The S&P 500 slid 0.1% on the session, while the Dow Jones Industrial Average shed 0.3%.
Market internals were lackluster. Volume was off considerably on both indices. Turnover on the NYSE was down by nearly 12%, while volume on the Nasdaq dropped 5.8%. Declining volume outpaced advancing volume on the NYSE by a ratio of 1.2 to 1. On the Nasdaq, the advancing volume to declining volume ratio ended the day at a positive 1.3 to 1. Monday's market internals provided no indication of institutional involvement in the broad market.
Yesterday, we entered one new position, reentered one that hit our stop and added to one of our open positions. Early in the session we were stopped out of PHO. However, due to the volume and price action in this ETF, we decided to reenter the trade late in the day. We added to our position in PBW as it advanced to an 11 month high. The decision to add to this trade was predicated on its relative strength and impressive volume. PBW remained strong during the early morning selling pressure and closed near the high of the day. It never traded lower than one cent below Friday's close. IEV hit our trigger at the open. It gapped down less than 1% below our trigger, so the gap rules did not apply. Trade details for the reentry in PHO and the 400 shares we added to the position in PBW can be found in the watchlist segment of the newsletter.
The iShares MSCI Thailand Investable Market Index ETF (NYSEARCA:THD) sold off sharply yesterday on a significant increase in volume. A drop below the November 17th low of $62.03 provides a potential shorting opportunity in THD. We are placing THD on the watchlist. For our subscribers, trade details can be found in the watchlist segment of the newsletter.
From time to time we will get stopped out of a trade but get right back in. Such was the case with PHO yesterday. Our decision to reenter the position was based solely on technical analysis. Each trade stands of its own merits irrespective of when it is entered or exited.
Deron Wagner is the Founder and Head Portfolio Manager of Morpheus Trading Group, a capital management and trader education firm launched in 2001. Wagner is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis (Bloomberg Press, August 2008), and also appears in the popular DVD video, Sector Trading Strategies (Marketplace Books, June 2002). He is also co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is a frequent guest speaker at various trading and financial conferences around the world, and can be reached by sending e-mail to: firstname.lastname@example.org.
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