The Wagner Daily - June 27, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks reversed sharply on Friday as volume increased. Four of the five major indices opened at the highs and closed near session lows. The exception was the small-cap Russell 2000 which managed to find a bid into the close. However the Russell still closed well within the bottom half of the daily trading range. The tech rich Nasdaq led the decline as it shed nearly 1.3% on the day. The S&P 500 and the Dow Jones Industrial Average slid by 1.2% and 1.0% respectively. The S&P MidCap 400 dropped 0.8% while the small-cap Russell 2000 managed to outperform the other indices as it declined only 0.7%.
Market internals cast a bearish shadow on the market yesterday. Turnover spiked by 38% on the Nasdaq and 9% on the NYSE. Declining volume was higher across the board as it outpaced advancing volume by a factor of 4.8 to 1 on the NYSE and 2.5 to 1 on the Nasdaq. The spike in volume clearly points to institutional involvement in broad market on Friday. However, some of the increase in volume is likely attributable to the rebalancing of the Russell indices. Irrespective of the required rebalancing, we would still classify Friday as a distribution day on Wall Street.
The Direxion Energy Bear 3x Shares ETF (NYSEARCA:ERY) appears poised to break to four month high. Since early March, ERY has not only broken a two year downtrend line but has recently set a sequence of two higher lows. A move above resistance at the $17.80 mark could provide a buy trigger for this ETF.
After gapping up on Thursday, the ProShares UltraShort EURO ETF (NYSEARCA:EUO) consolidated in a tight range near the two day high on Friday. A move back above Thursday's high of $17.66 may provide buying opportunity in EUO. We are carefully monitoring this ETF as a potential long candidate.
The market continued its inconsistent ways on Friday. There now appears to be a tug of war for support at the 200-day moving average. It is noteworthy that the Nasdaq 100 Index and the NYSE both closed below their 200-day moving average on Friday after moving above this key mark last Thursday. Further, the Nasdaq ($COMPX) undercut and closed just one point above the 200-day MA on Friday. If the broad market loses support of Thursday's reversal low, this could bring another wave of selling on Wall Street.
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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