The Wagner Daily - August 18, 2011
Concise technical analysis and picks of the leading global ETFs
In what has been a rare occurrence over recent sessions, stocks ended the day mixed on light volume. Stocks began the session on a high note but by 10:30 am the market reversed and stocks slid to session lows. However by 2:00 pm stocks recovered and pared losses. The S&P 500 managed to eke out a 0.1% gain while the DJIA closed fractionally higher. Both the tech-rich Nasdaq and the S&P MidCap 400 lost 0.5%. The small-cap Russell 2000 slid a minimal 0.1%.
Market internals also ended the session mixed. Volume was lower across the board. Turnover decreased by 7.9% on the Nasdaq and by 14.6% on the Big Board. Advancing volume topped declining volume by a factor of 1.5 to 1 on the NYSE. However on the Nasdaq declining volume beat out advancing volume by 1.7 to 1. The combination of mixed price action and mixed internals suggest indecision in the market. Institutional money was nowhere to be found on Wednesday.
Since its breakout move which began on August 2nd, the ProShares UltraShort Basic Materials ETF (NYSEARCA:SMN) has pulled back to support of its 20-day EMA. Over the past four sessions SMN has been consolidating in a tight trading range and holding support of its 20-day EMA. Yesterday this ETF formed a reversal candle as it sold off, touched its 20-day EMA and recovered to close near the session high. A volume fueled move back above the two day high of $21.16 could offer a buying opportunity in this inverse ETF.
The Direxion Emerging Markets Bear 3X ETF (NYSEARCA:EDZ) undercut its 20-day EMA and formed a distinct doji star candlestick yesterday. A doji star suggests that there is a tug of war occurring between bulls and bears and that the pullback move may be losing momentum. We now must wait for a setup to present itself. We will be monitoring EDZ carefully for a possible long entry.
Via an intraday alert we opened a short position (half) in the DOW Jones US Real Estate Index Trust ETF (NYSEARCA:IYR). Trade details are available to subscribers in the open positions segment of the newsletter.
The recent move higher appears to be weakening. However, setups are still forming. Many ETFs are now approaching resistance and it appears that more short setups are on the horizon.
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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