Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Short setup in bond ETF (NBB)- November 22, 2010

|Includes: SPDR S&P 500 Trust ETF (SPY)
MTG logo

The Wagner Daily - November 22, 2010
Concise technical analysis and picks of the leading global ETFs


All of the major indices posted slight gains in Friday's session, as volume decreased. Stocks slid modestly at the open, gained footing around 10:30 am, and spent the remainder of the day in a sheepish rally. The markets have been consolidating in a tight trading range since last Thursday's opening gap. The gap has acted as support, while the highs set on Thursday have marked resistance. The small-cap Russell 2000 and the S&P MidCap 400 performed the best on Friday, as they rallied by 0.5% and 0.4% respectively. The S&P 500 rose by 0.3%. The Dow Jones Industrial Average and the Nasdaq both settled for a 0.2% advance on the session.

Turnover was down on both the NYSE and the Nasdaq at the closing bell on Friday. The drop in volume was fairly large, but not when compared against the volatility of last week's trading. For the day, the volume on both the Nasdaq and the NYSE slid 10%. The ratio of advancing to declining volume was slightly up on both indices. The ratio on the NYSE was a plus 1.3 to 1. The Nasdaq found up volume outpacing down volume by 1.1 to 1. Friday's trading brought no clear signal as to the next move in the market.

A brief analysis of the major indices is helpful following major market volatility. Below are charts for the DJIA, SPY and Nasdaq. Note the impact of the recent selloff. For the first time since the August rally began, all of these indices plummeted below the 20-day EMA. The result of this price action is the establishment of short term support and resistance levels. A rally above resistance would signal the likelihood of the uptrend remaining intact and vice versa. As discussed in Friday's newsletter, price consolidation would be a healthy signal for a continued uptrend.

The Nuveen Build America Bond Fund (NYSE:NBB), has recently seen distribution on heavy volume. NBB lost support of a 6 month trading range. This former support should present formidable resistance for any rally. This ETF also has the down trending 20-day EMA to contend with. Finally, the fifty percent Fibonacci retracement level presents resistance just below the 20-day EMA. A rally into this "zone of resistance", should provide the opportunity to short NBB. We are placing NBB on the watchlist. For our subscribing members, the trade details can be found in the watchlist portion of the newsletter. For those trading in an IRA, 401K or other qualified account, buying the ProShares UltraShort 20+ Year Treasury ETF (NYSEARCA:TBT) would be a reasonable proxy for shorting NBB.

The SPDR S&P Metals and Mining ETF (NYSEARCA:XME), has rallied nicely after an undercut of the 20-day EMA. The rally back into the trading range has been accompanied by strong volume. As with most trades we are currently evaluating, we would like to see a period of consolidation before taking a long position.

Over the past several days of scanning trades, there are a higher percentage of short setups and neutral setups (possible trend reversal) than we have seen in a quite a while. Now that options expiration week is behind us, the next several days of trading action should help clarify where the market is likely headed.

The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit

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:

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 (

© 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.