The Wagner Daily - November 8, 2011
Concise technical analysis and picks of the leading global ETFs
For a second consecutive day stocks rebounded from a slow start to close near session highs. However, stocks did close mixed on the session and trade was light. The small-cap Russell 2000 and the S&P MidCap 400 slid 0.2% and 0.1% respectively. After a shaky start, the Nasdaq tacked on 0.3%. The S&P 500 gained 0.6% while the Dow Jones Industrial Average led all indices as it posted a 0.7% gain.
For the second time in as many days market internals ended mixed. Volume dropped by 11.0% on the Nasdaq and by 6.0% on the NYSE. The ratio of advancing volume to declining volume was higher across the board. By the closing bell the spread ratio ended at a +1.7 to 1 on the Big Board and a +1.2 to 1 on the Nasdaq. For the second day in a row the weak market internals suggested a lack of institutional participation in the market.
The Consumer Discretionary Select Sector SPDR ETF (NYSEARCA:XLY) has been consolidating for the past four days above its 200-day MA. A move above the yesterday's high of $39.18 on a burst of volume could provide a buy entry trigger for this ETF. We are monitoring this setup carefully for a potential long entry.
Over the past three sessions the Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) has formed consecutive reversal candles as it undercut the 200-day MA but finished each day near session highs. A thrust above the October 31st high of $54.19 could present a buying opportunity in this ETF.
Our open positions in XRT and PPH continue to act well as they have been consolidating for a possible move higher. With a little cooperation from the market both trades should perform well. Our market bias continues to be bullish but we are still patiently waiting for new leadership stocks to emerge. For the moment, all that would cause major concern for the long side of the market would be the emergence of further distribution days.
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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