The Wagner Daily - January 27, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Stocks closed Wednesday's session higher on a pickup in volume. All five major indices finished the day up. The small-cap Russell 2000 led all indices by posting a healthy 1.6% advance. The Nasdaq and the S&P MidCap 400 both rose by 0.8% yesterday. The S&P 500 closed higher by 0.4%, while the Dow Jones Industrial Average eked out a 0.1% gain on the session. The Dow tested but was unable to hold the technically important 12,000 mark. Despite the overall positive market action, both the Dow and the S&P 500 saw late day selling pressure that forced both averages to close near the middle of their trading ranges.
For the second consecutive session, volume was higher across the board. Turnover closed up by 2.9% on the NYSE and 5.1% on the Nasdaq. In a reversal of Tuesday's action, advancing volume gained the upper hand on both indices. The ratio of advancing to declining volume was 1.7 to 1 on the Big Board and 2.2 to 1 on the Nasdaq.
We covered the remaining 100 shares of our short position in GDXJ yesterday due to the formation of a bullish reversal candle. However, GDXJ (GDX Also) has established a new major swing low. This suggests that GDXJ will provide shorting opportunities into rallies. Both the 20-day EMA and the 50-day MA should present formidable resistance now that GDXJ has breached these former support levels. PIZ showed signs of life as it rallied on strong volume. FRN continued to show weakness and is showing all the rights signs for continued distribution. We are keeping a close eye on our short position in EPU since it rallied on strong volume, following Tuesday's reversal bar.
The Market Vectors Brazil Small-Cap ETF (BRF) has demonstrated relative weakness over the past two trading sessions. During this timeframe, BRF has opened at the highs and closed near the lows of each day. A move below yesterday's low of $55.25 presents a possible short trigger for this ETF.
The Market Vectors Indonesia ETF (IDX) may provide a shorting opportunity into this rally. Just overhead is major Fibonacci resistance. Further, the move up has been on light volume. We will be watching closely for a possible entry point.
After undercutting the 20-day EMA the DB Commodity Index Tracking Fund (DBC) rallied sharply today on increasing volume. Should volume remain strong, a move back above $28.00 could present a buy entry for this ETF.
We remain in an uptrend but recent movement in the market has not been broad based. Given this trading environment we are inclined to hedge by establishing both long and short positions.
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: deron@morpheustrading.com.
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