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Rally Unsustainable Without Volume: (EWM)(EUO) - September 16, 2011

|Includes: ProShares UltraShort Euro ETF (EUO), EWM
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The Wagner Daily - September 16, 2011
Concise technical analysis and picks of the leading global ETFs


Stocks closed higher for a fourth straight day but on lower trade. All five major indices closed near session highs. However, in a reversal over Wednesday's action, large cap stocks took the leadership role as both the Dow Jones Industrial Average and the S&P 500 added 1.7%. The S&P MidCap 400 put in a solid performance as it tacked on 1.6%. The small-cap Russell 2000 improved by 1.4% while the Nasdaq lagged for the first time in four days but still closed higher by 1.3%.

Market internals were mixed on Thursday. Volume fell considerably on both exchanges. By the closing bell trade on the Nasdaq had tumbled by 15.0% and on the NYSE by 12.0%. Still, advancing volume held the upper hand as it outpaced declining volume by a ratio of 7.8 to 1 on the NYSE and 3.2 to 1 on the Nasdaq. Despite the strength of Thursday's price action, the light volume suggests that institutional traders were not actively participating in the move. Consequently we would not classify yesterday as an accumulation day on Wall Street.

Via an intraday alert we entered a long position in EUO after the five minute mark yesterday. We liked the entry in this ETF because it gapped down into support near $18.00. Further, given the strength of the recent breakout buyers are likely to be in abundance near major support levels. Trade details are available for our subscribers in the watchlist section of the newsletter.

Over the past week EWM has been exhibiting relative weakness as it lost support of its swing low from August 26th. Over the past two days EWM has formed back to back reversal candles and now appears to have formed a bottom. A rally back into resistance of the August 26th low and the down trending 20-day EMA could provide a shorting opportunity in this ETF.

Based on price action alone yesterday's rally was impressive. However the poor volume definitely places in question the strength of the rally. As long as institutions continue to sit on the sidelines it is unlikely that any abrupt moves higher are sustainable.

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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