The Wagner Daily - October 3, 2011
Concise technical analysis and picks of the leading global ETFs
Friday was a bad day for Wall Street as stocks fell sharply and closed near session lows. All five major indices plummeted more than two percent with higher beta issues leading the decline. Both the small-cap Russell 2000 and the S&P MidCap 400 plunged 2.8% while the Nasdaq dropped just over 2.6%. The S&P 500 fell 2.5% and the Dow Jones Industrial Average shed 2.2%.
Although Friday's price action was decidedly bearish, the session ended with market internals mixed. Volume increased on the Big Board by 5.7% while it fell on the Nasdaq by 11.4%. However declining volume overwhelmed advancing volume on the NYSE and the Nasdaq by 15.8 to 1 and 8.8 to 1 respectively. Friday's higher volume selloff on the NYSE points to institutional distribution.
In Friday's newsletter we stated that, "the ProShares UltraShort Silver ETF (NYSEARCA:ZSL) has been consolidating just above its 20-day EMA and now appears poised for another move higher. A rally above the two day high of $17.32 could provide a long entry trigger for ZSL". ZSL acted well on Friday as it closed near session highs and is now within striking distance of $17.32. We are placing ZSL on the watchlist. Trade details are available to our subscribers in the watchlist segment of the newsletter.
The SPDR S&P Retail ETF (NYSEARCA:XRT) gapped down and closed near session lows yesterday. A move below the two day low of $46.13 could provide a shorting opportunity in this ETF.
Our positions in XLP, SRS and EFZ all acted well on Friday and we are now well in the money on all three trades. Should the market gap down on Monday we may look to take profits on at least a portion of each trade. Now that we are back within a few points of the critical support level of 1,120 on the S&P it is likely that this mark will be tested on Monday. If we are unable to maintain support at 1,120 then we'll likely see a test of 1,100.
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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