The Wagner Daily - November 29, 2010
Concise technical analysis and picks of the leading global ETFs
Friday marked the eighth consecutive session of whipsaw trading, with the Dow and the S&P 500 continuing to lag the other major indices. Still, all five indices lost ground on the day. The Dow Jones Industrial Average led the selling as it fell 0.9%, while the S&P 500 shed 0.8% in yesterday's action. Both the S&P MidCap 400 and the small-cap Russell 2000 lost 0.5%, while the Nasdaq dropped 0.3% on the session. For the week the Nasdaq rose by 0.7%, while the Dow and the S&P 500 shed 1% and 0.9% respectively.
As would be expected for a holiday shortened session, turnover was down substantially. On the NYSE volume was off by 44%, while Nasdaq volume was down by 43% day over day. Given the light trading volume, little can be gleaned from the advancing volume to declining volume ratio. On the day, declining volume outpaced advancing volume on the NYSE by a factor of 5 to 1. The ratio on the Nasdaq was 1.7 to 1 in favor of declining turnover.
After a huge volume gap-up on November 4th, the PowerShares Water Resources Portfolio ETF (NASDAQ:PHO), has been consolidating just below the 52-week highs for the past four weeks. Further, PHO formed another support base from October 13th until the November breakout. A volume assisted rally above the November 9th high of $18.15 will likely propel this ETF to a new one year high. As such, we are placing PHO on our watchlist. For our subscribing members, the trade details are posted in the watchlist segment of the newsletter.
The ProShares Ultrashort MSCI Brazil ETF (NYSEARCA:BZQ), is exhibiting signs of trend reversal. On a big spike in volume on November 4th, BZQ gapped down and set a new low. However, the new low just undercut the previous low set on October 13th. Within three days, BZQ rallied sharply. On November 16th this ETF saw a major increase in volume and gapped above the 50-day MA. It has traded above this mark ever since. Further, BZQ has been consolidating above the downtrend line that began forming on May 25th. A rally back above the November 23rd high of $18.04 would present a potential buying opportunity for BZQ. We are placing BZQ on the watchlist. Trade details are posted below.
We are still wary of becoming overly aggressive given the current choppiness in the market. As we stated on Friday, "the Dow and the S&P 500 most likely hold the key to the next significant move in the market". We will be monitoring both indices closely.
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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