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Rally Running Out of Steam?: (XRT) - September 1, 2011

|Includes: ProShares Short Russell2000 ETF (RWM), XRT
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The Wagner Daily - September 1, 2011
Concise technical analysis and picks of the leading global ETFs


Wednesday brought whipsaw action to the market as stocks finished modestly higher. Both the Dow Jones Industrial Average and the S&P 500 tacked on 0.5% while the S&P MidCap 400 improved by 0.3%. The Nasdaq eked out a 0.1% gain as the small-cap Russell 2000 was the sole loser on the day as it closed lower by 0.1%.

For the second day in a row market internals were superficially bullish. Volume was up on the Nasdaq by 7.2% and on the NYSE by nearly 14.0%. Advancing volume outpaced declining volume by a ratio of 2.6 to 1 on the NYSE and 1.2 to 1 on the Nasdaq. Although yesterday was technically an accumulation day, price action was unimpressive across the board and it appeared that institutions may have been selling into strength. Further, advancing volume barely outpaced declining volume for the second consecutive day on the Nasdaq.

Yesterday, via an intraday alert we entered a long position in the ProShares Short Russell 2000 ETF (NYSEARCA:RWM). We liked this trade because RWM pulled back into support of, and undercut its 61.8% Fibonacci retracement level which also coincides with its rising 50-day MA. We took on small size and set a wide stop in order to accommodate for a somewhat early entry. Trade details are available to our subscribers in the open positions section of the newsletter.

Yesterday, the SPDR S&P Retail ETF (NYSEARCA:XRT) rallied and "overcut" its 200-day MA before selling off sharply to close in the bottom 30% of its intraday range. A move back below yesterday's low of $49.18 could provide a shorting opportunity in this ETF. We are monitoring XRT closely for a possible short entry.

The fact that so many reversal candles formed yesterday casts doubt on the remaining strength in the current rally. The market appears to be running out of steam but we would not be surprised to see another run at Wednesday's highs prior to the market taking another leg down.

The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit

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:

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