The Wagner Daily - October 11, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks staged impressive gains and closed near session highs on Monday as trade fizzled. All five major indices posted gains of three percent or more with small-cap stocks leading the charge. The small-cap Russell 2000 closed up a whopping 4.4%. The tech rich Nasdaq added 3.5% while the S&P MidCap 400 and the S&P 500 both improved by 3.4%. The Dow Jones Industrial Average tacked on 3.0%.
Market internals were mixed for the fourth consecutive day and must be strongly considered when interpreting the day's positive price action. Volume plummeted on both exchanges by a massive 24.0% but advancing volume overwhelmed declining volume by 16.7 to 1 on the NYSE and 7.0 to 1 on the Nasdaq. The anemic volume speaks clearly to the absence of institutional participation in Monday's rally. Since the reversal day last Tuesday the market has still not posted a follow through accumulation day. For the moment it appears as if the current rally may be nothing more than a house of cards.
Over the past two weeks the Nasdaq 100 Index ($NDX.X) has shown relative strength to the broad market but is now approaching major resistance at its 200-day MA. An overcut of and reversal back below this key mark could provide an early signal that the current rally is reaching exhaustion. We will be monitoring the Nasdaq 100 closely for signs of a reversal.
Over the past five sessions the ProShares UltraShort FTSE China 25 ETF (NYSEARCA:FXP) has been selling off and has now pulled back into support near its 20-day and 50-day moving averages. We are now awaiting the formation of a reversal candle to provide a possible long entry signal for this ETF.
Five days of rallying on light volume is far from what the market needs to reverse the current bear market trend. Without institutional participation it's unlikely that this advance can hold up much longer. Light volume rallies are indicative of bear market bounces.
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.
DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.
Charts created by TradeStation (tradestation.com).
Â© 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.