The Wagner Daily - July 21, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks ended the session essentially flat on a modest decrease in volume. With the exception of the Nasdaq, the major indices also ended the session flat. The technology laden index closed lower by 0.4% under the weight of heavy selling in the networking sector among others. The S&P MidCap 400 ended the day flat while Dow Jones Industrial Average, S&P 500 and small-cap Russell 2000 all shed 0.1% on the session. For the most part the market consolidated at the two day high.
For the second time in as many days market internals were mixed. Volume was fractionally lower on the Nasdaq but down almost 7.0% on the NYSE. The advancing volume to declining volume ratio was a mirror opposite between the NYSE and the Nasdaq. On the NYSE advancing volume outpaced declining volume by 1.4 to 1 while on the Nasdaq declining volume got the upper hand by the same factor. The lighter volume and flat price action suggests that Wednesday was nothing more than a consolidation day for the broad market. There is no evidence to suggest that institutions were actively involved in the market yesterday.
Via an intraday alert we sold our position in URE for a quick 1.6 point gain. We didn't like the whippy action in the broad market and decided to protect a solid profit.
Since losing support of its 200-day MA on June 22nd, the iPATH Dow Jones AIG Grains ETF (NYSEARCA:JJG) has rallied back above this key mark. However, over the past two sessions two reversal candles have formed that suggest JJG may be in the midst of a pullback. A move below the two day low of $51.36 may provide an opportunity to short JJG.
Since a big breakout move on June 28th, the EG Shares Dow Jones Consumer Titans ETF (NYSEARCA:ECON) has been formed a bullish pennant like pattern and could be preparing for another move higher. A volume fueled rally back above yesterday's high of $24.15 could present a buying opportunity in this ETF.
The market continues to send mixed messages as money rotates among sectors. Leadership is still present in the market so our current bias is bullish. However due to sector rotation there are ETFs that could provide shorting opportunities. We remain cautious as whipsaw moves can quickly erase profitable trades. We are currently trading with half or less of our normal position size.
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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