The Wagner Daily - February 18, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks reversed off of session lows on Thursday, and carried all five major indices to new highs. However, trade was soft. For a second consecutive day the small-cap Russell 2000 led all indices, as it ended the day 0.7% higher. The S&P MidCap 400, S&P 500, Dow Jones Industrial Average and Nasdaq posted gains of 0.5%, 0.3%, 0.3%, and 0.2% respectively.
Despite relatively strong price performance in the market, Thursday's internals were mixed. Turnover was off by 15.2% on the Nasdaq and 4.4% on the NYSE. For a second consecutive day advancing volume outperformed declining volume. The ratio of up to down volume ended the session at 2.3 to 1 on the NYSE and 1.5 to 1 on the Nasdaq.
Based on today's price performance by KBE, the setup has been nullified and we are removing it from the watchlist. We are still monitoring the price action in PALL for a potential add above the three-day high (we will send alert if any action is taken).
The iPath DJ-UBS Commodity Index Trust ETN (NYSEARCA:DJP) has spent the past 8 weeks consolidating along its 20-day EMA. Recently DJP undercut this key moving average thereby "shaking out" the weak hands. Yesterday DJP rallied almost the entire day and finished virtually at its intraday high. We are placing DJP on the watchlist. For our subscribing members, trade details are available in the watchlist segment of the newsletter.
The iPath DJ AIG Copper Trust (NYSEARCA:JJC) formed a bullish reversal candle yesterday on an explosive increase in volume. A rally above the two day high of $60.44 presents a possible long trigger for this ETF. We will be monitoring JJC closely for a possible entry point.
Our trading approach adheres strictly to technical analysis, as we believe that all market information is reflected in the daily price and volume action of charts. Spending an exorbitant amount of time reflecting on news or hunting down explanations as to why the market is moving in a particular direction is in our opinion, a wasteful endeavor. This is why we have maintained a bullish bias despite being cautious about the conviction of the current advance. Still, we have been willing to play the short side of the market when our technical criteria suggest that we should do so.
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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