The Wagner Daily - November 23, 2010
Concise technical analysis and picks of the leading global ETFs
The major indices closed mixed in a whipsaw trading session on Monday. At the open stocks sold off sharply. Intraday, the Nasdaq was down as much as 0.7%. The Dow Jones Industrial Average and the S&P 500 both slid over 1.3% in early trading. The early selling pressure erased most of Thursday's gains. But at 1:00 pm the market reversed sharply, carrying three of the five indices into positive territory for the session. The S&P MidCap 400, Nasdaq and small-cap Russell 2000 posted gains of 0.7%, 0.6% and 0.4% respectively. However, the Dow Jones Industrial Average and the S&P 500 both slid 0.2% in Monday's trading.
Market internals ended mixed for the session. Volume on the NYSE plummeted by 18%, while the Nasdaq saw a slight increase in turnover of 2.4%. On the NYSE declining volume outpaced advancing volume by a factor of 1.5 to 1. The Nasdaq turned in a mirror opposite result, as the up volume edged out down volume by a 1.5 to 1 margin. Because of the mixed internals, yesterday's trading can be characterized as consolidation.
The JPMorgan Alerian MLP Index ETN (NYSEARCA:AMJ), appears prepared to continue its uptrend. During the recent market selloff, AMJ undercut the 20-day EMA. Over past several sessions this ETF has rallied back above this important moving average. Yesterday, on a big spike in volume, AMJ set a three day high. A breakout above the November 15th high provides a possible entry trigger for AMJ.
We have been tracking the iShares MSCI Spain Index ETF (NYSEARCA:EWP) for several weeks now. Today, EWP gapped and closed below support of the 200-day MA on a big spike in volume. Because of yesterday's bearish action in this ETF, we are placing it on the watchlist as a short candidate. Trade details can be found in the watchlist segment of the newsletter.
The Market Vectors Coal ETF (NYSEARCA:KOL) appears ready to break to new highs. We are placing KOL on the watchlist. Recently, KOL undercut the 20-day EMA and simultaneously tested support of the swing high established in January. Since the selloff, KOL has rallied back strongly and is testing its previous highs. Volume has been increasing the past three sessions. A move above the November 9th high would provide a potential long trigger for KOL. Trade details are provided for our subscribing members below.
The market continues to show indecision. Choosing trade setups that are exhibiting relative strength or relative weakness when the market is in flux, provides the opportunity to enter a position without taking on exorbitant risk in the event of a sharp reversal. Further, if the market remains in a trading range, strong ETFs will generally rally and weak ETFs will generally decline.
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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