The Wagner Daily - December 2, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks ended the day mixed on light trade. Following Wednesday's explosive move higher, the major indices spent yesterday consolidating near the previous day's highs. The Nasdaq was the only index to end the session higher, as it posted a modest 0.2% gain. The small-cap Russell 2000 fell 0.9% while the S&P MidCap 400 slid 0.6% on the session. Both the Dow Jones Industrial Average and the S&P 500 posted small losses of 0.2%.
Market internals also ended the session mixed. Turnover dropped sharply on both exchanges. By the closing bell volume on the Nasdaq was down by 24.0% and on the NYSE by 32.1%. Declining volume slightly outpaced advancing volume on the NYSE by a ratio of 1.4 to 1. However, advancing volume edged out declining volume on the Nasdaq by a factor of 1.3 to 1. Yesterday's price and volume action was typical for a market coming off of a big reversal day.
In Thursday's newsletter we stated that AGA may present a buying opportunity with, "…an undercut of the 20-day EMA". Yesterday, on an expansion in volume, AGA formed a reversal candle as it undercut its 20-day EMA and rallied to end the session in the top third of its trading range. A move back above Thursdays high of $19.71 could provide a buy entry trigger for AGA.
The United States Oil Fund ETF (NYSEARCA:USO) has demonstrated excellent relative strength over the past several weeks. While the broad market struggled to regain support of the 200-day MA, this ETF reclaimed and maintained support of this key moving average. A move above the two day high of $39.25 could present a buying opportunity in this ETF.
In the wake of a big breakout day, the markets performed as might be expected yesterday, as they consolidated at the two day high. This type of price action is typical for a market preparing for a move higher. With the immediate fear of a European meltdown apparently in check, the broad market appears ready to make another move higher.
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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