The Wagner Daily - March 7, 2011
Concise technical analysis and picks of the leading global ETFs
The market appeared headed for a big down day on Friday, but a late session rally brought stocks well off the lows of the day. Nonetheless, all five major indices ended the day in the red. The Dow Jones Industrial Average, S&P 500 and S&P MidCap 400 all ended the day lower by 0.7%. The technology rich Nasdaq fell by 0.5%, while the small-cap Russell 2000 shed 0.4% on Friday.
Market internals ended the session mixed. Turnover fell 6% on the Nasdaq and 2.2% on the Big Board. Declining volume outpaced advancing volume by a factor of 3.1 to 1 on the NYSE and 2.1 to 1 on the Nasdaq. The decline in volume may have assisted in preventing a more significant pullback in the market on Friday.
In Friday's newsletter we stated, "The JPMorgan Alerian MLP Index ETN (NYSEARCA:AMJ) has been consolidating for almost three weeks in a tight range. A potential buying opportunity exists with a move back above yesterday's high of $38.22 and/or the three day high of $38.34. One strategy would be to purchase a partial position above yesterday's high and add to the position should AMJ rally above the March 1st high". Based on yesterday's price and volume action in this ETF we are placing it on the watchlist. A reversal after Friday's selloff could power this ETF to new highs. For our subscribing members trade details are located in the watchlist section of the newsletter.
The PowerShares DB Base Metals ETF (NYSEARCA:DBB) has been consolidating over the past week on declining volume. This price and volume action is often a technical clue that an ETF is preparing to continue the prevailing trend. A rally back above $25.45 May present a buying opportunity in DBB.
The SPDR Series KBW Bank ETF (NYSEARCA:KBE) reversed sharply on Friday, as it gapped down following a strong gap up and rally last Thursday. This reversal occurred on increasing volume further compounding the bearishness of the move. A loss of support near $25.75 could result in a further downward pressure on this ETF. KBE is being placed on the watchlist. Details of the setup are available in the watchlist segment of the newsletter. For those of you trading in qualified accounts, taking a long position in the inverse ProShares UltraShort Financials ETF (NYSEARCA:SKF) offers a possible alternative to shorting KBE.
The market continues to exhibit indecision amidst strong divergence among sectors. Leadership has not yet abandoned the market but the market picture has become more clouded in recent weeks.
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.
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).
© 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.