The Wagner Daily - September 8, 2011
Concise technical analysis and picks of the leading global ETFs
For the second consecutive day stocks closed at the highs but trade was mixed. All five major indices saw sizable gains with the Russell 2000 leading the way. By the closing bell the small-cap index had tacked on an impressive 4.2%. The S&P MidCap 400`and the Nasdaq added 3.6% and 3.0% respectively. The S&P 500 climed 2.9% while the Dow Jones Industrial Average improved by 2.5%.
Wednesday's action was driven by mixed internals. Volume rose a modest 2.9% on the Nasdaq but dropped a noteworthy 17.4% on the NYSE. However advancing volume overpowered declining volume on both exchanges. By the closing bell the spread ratio stood at an impressive 18.8 to 1 on the Big Board and 15.4 to 1 on the Nasdaq. The uptick in volume and the higher advancing combined to create an accumulation day for the Nasdaq. The significantly lighter volume on the NYSE points to a lack of institutional involvement on this index.
In Wednesday's newsletter we discussed the bullish action in the ProShares UltraShort Euro ETF (NYSEARCA:EUO) stating that we may be witnessing a trend reversal. Yesterday this ETF pulled back and it appears likely that it might fill the gap created on September 6th. We are placing EUO on the watchlist. Trade details are available to our subscribers in the watchlist segment of the newsletter.
During the last market downturn the iShares MSCI Japan Index ETF (NYSEARCA:EWJ) showed significant relative weakness as it undercut a critical support level $9.40. Further, EWJ is one of the few ETFs that is still significantly removed from its 20-day EMA. Should EWJ find its way back near the 20-day EMA this could provide a possible shorting opportunity for this ETF. We are monitoring EWJ closely as a potential short candidate.
TThe markets continue to exhibit significant volatility. As we have stated many time before, volatility is generally a bearish signal. Sharp reversals and rapid advances like we have seen over the past two sessions are generally unsustainable. Although the current advance may have further upside potential, at a minimum we would not be surprised to see some selling pressure enter the market tomorrow.
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.
DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter "The Company") is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock's actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter "The Newsletter"). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.
Charts created by TradeStation (tradestation.com).
Â© 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.