The Wagner Daily - August 26, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks slid sharply on Thursday but on mixed trade. All five major indices gapped higher at the open, reversed at the 10 minute mark and slid haplessly into the close. Higher beta issues led the plunge as the small-cap Russell 2000, S&P MidCap 400 and Nasdaq fell by 2.6%, 2.2% and 2.0% respectively. The S&P 500 slid 1.6% while the Dow Jones Industrial Average ended the session 1.5% lower.
Market internals ended mixed for a second consecutive day. Turnover fell on the Nasdaq by 4.4% but increased on the NYSE by 7.1%. Declining volume ruled the day as it overpowered advancing volume by a factor of 3.5 to1 on the NYSE and 8.2 to 1 on the Nasdaq. The combination of higher volume and higher declining volume points to institutional distribution on the NYSE. The same cannot be said for the Nasdaq as volume was lower.
Yesterday, on a spike in volume the ProShares UltraShort Oil & Gas ETF (NYSEARCA:DUG) gapped down, undercut its 20-day EMA and reversed to close near the session high. A move back above $35.35 could present a long opportunity in this ETF.
Since its breakout move in early August the ProShares UltraShort FTSE China 25 ETF (NYSEARCA:FXP) has been consolidating along its 20-day EMA. Further, this ETF has seen a contraction in price action during this time frame. Yesterday, FXP gapped down and tested support of the 20-day EMA before it reversed and closed in the upper third of its intraday range. A move back above yesterday's high of $34.70 may provide a long entry trigger for FXP. We are monitoring this setup closely for a possible long entry.
Yesterday we entered a long position in the inverse ETF, BZQ. Trade details are available to our subscribers in the open position section of the newsletter. The market continues to struggle in its attempt to build some positive momentum. After a meager two day rally the broad market was met with significant selling pressure yesterday. As a result many short setups presented themselves in our nightly research. Bears continue to set the tone for the market.
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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