The Wagner Daily - February 7, 2011
Concise technical analysis and picks of the leading global ETFs
For the second consecutive day Stocks closed modestly higher. After an early morning dip, the broad market recovered and finished the session near the day's high. The Nasdaq and the S&P MidCap 400 led the advance, as both indices posted a 0.6% gain. The S&P 500 and the Dow Jones Industrial Average both gained 0.3%, while the small-cap Russell 2000 posted a 0.2% improvement.
As has been common lately, market internals ended the session mixed. In Friday's session turnover on the Big Board dropped by 9.0%, while it increased by a modest 1.5% on the Nasdaq. The ratio of advancing volume to declining volume was 2.1 to 1 on the Nasdaq, and 1.1 to 1 on the NYSE.
On Friday, both FDN and PALL hit their triggers and we entered both long positions. FDN performed well on Friday, as it closed near the high of the day on a nice pop in volume. On the other hand, PALL showed early promise but fell victim of a false breakout and closed near the low of the day.
The PowerShares Listed Private Equity ETF (NYSEARCA:PSP) is on the cusp of a possible move to higher ground. A rally above $11.27 may signal a buying opportunity for PSP. We have PSP on the radar but we are hesitant to make an official call, since false breakouts (to new highs) have been common lately.
On Friday, the iShares Russell Microcap Index ETF (NYSEARCA:IWC) saw a bullish inside day (Friday's candlestick traded within the range of the previous day's candlestick) accompanied by a contraction in volume. This combination of price and volume movement is often a bullish signal. A move above the three day high of $50.72 could result in further upside for this ETF.
After losing support of the 20-day EMA, the 50-day MA and the uptrend line, the Schwab Emerging Markets Equity ETF (NYSEARCA:SCHE) has rallied back into resistance at these key moving averages. A drop below the four-day low of $24.90 could present a short trigger for SCHE.
The week ended with the Dow and the S&P 500 at new highs, while the Nasdaq, the Russell 2000 and the S&P Midcap 400 all basically remained in their respective trading ranges. We expect to see further buying in the market with emerging market ETFs being one notable exception.
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: email@example.com.
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