The Wagner Daily - August 4, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks reversed sharply intraday to post the first winning session in 9 days. All five major indices posted gains with the Nasdaq leading the way. The tech rich index ended the session higher by 0.9%. The small-cap Russell 2000 added 0.7% as both the S&P MidCap 400 and the S&P 500 posted gains of 0.5%. The Dow Jones Industrial Average lagged on the day as it posted a small 0.25% advance.
Market internals were bullish as the market reversed for higher ground. Volume spiked by 8.6% on the Nasdaq and 11.3% on the NYSE. Advancing volume outperformed declining volume by a factor of 1.4 to 1 ont eh NYSE and 2.4 to 1 on the Nasdaq. Given the strength of the reversal and the solid internals, it is reasonable to conclude that institutions were actively accumulating stocks on Wednesday.
Over the past two sessions the S&P Depository Receipts (NYSEARCA:SPY) has lost support of its prior swing low ($126.19), 200-day MA and two year uptrend line. Yesterday SPY formed a reversal candle and may be prepared to reclaim these key support levels. However, these levels should serve as formidable resistance for SPY now that it is attempting to recover from eight days of heavy selling. SPY may present a shorting opportunity on a rally back into resistance at its 20, 50 and 200-day moving averages. We will be watching SPY closely for a possible shorting opportunity.
The iShares MSCI Malaysia Index (NYSEARCA:EWM) has been performing admirably during the recent market carnage. As most ETFs have seen a significant decline EWM has consolidated and held support of its 50-day moving average. Should the market reverse, EWM's relative strength could make it a possible long candidate. Ideally we would like to see several days to several weeks of basing action before any possible breakout move in this ETF. Basing action typically acts as a spring board for the next move.
Yesterday via an intraday alert we exited our positions in BZQ for solid 1.3 point gain. The broad market as measured by the S&P 500 is now at a crossroad as it has lost horizontal support, support of the long term uptrend line and support of the 200-day MA. Further, we have set a "lower-low". Unless the market makes a strong move back above these key levels we will be inclined to short into any rallies.
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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