The Wagner Daily - November 16, 2011
Concise technical analysis and picks of the leading global ETFs
Stocks moved higher on Tuesday on an uptick in trade. All major indices closed in the black with the Russell 2000 leading the charge. By the closing bell the small-cap index posted a 1.4% gain. The Nasdaq tacked on 1.1% while the S&P MIdCap 400 added 1.0%. The S&P 500 and the Dow Jones Industrial Average underperformed on the day but still posted gains of 0.5% and 0.1% respectively.
Market internals were bullish on Tuesday. Volume spiked on the Nasdaq by 21.5% and on the NYSE by 19.1%. Advancing volume topped declining volume on both exchanges, with the spread ratio ending at a plus 1.8 to 1 on the NYSE and 1.9 to 1 on the Nasdaq. The uptick in volume accompanied by the higher advancing volume, suggests institutional buying on Tuesday. We would therefore categorize yesterday as an accumulation day for the market.
The Direxion Small Cap Bull 3x Shares (NYSEARCA:TNA) has been consolidating along its 20-day EMA as it has been setting a sequence of higher lows. This contraction in price action is one of the things we look for in stocks that are potential long candidates. Yesterday, on a big spike in volume, TNA undercut its 20-day EMA but recovered to close back above this key mark and at the three day high. A move above yesterday's high of $47.64 could provide a buying opportunity in this ETF.
XRT has spent most of the past three weeks consolidating at its 20-day EMA. Since establishing a higher-low on November 9th XRT has reclaimed the 20-day EMA and has been consolidating above this mark. Trade details are available to our subscribing members in the watchlist section of the newsletter.
It is noteworthy that the market was able to overcome an early morning gap down and a significant drop in the S&P and Nasdaq futures in overnight trading. This is precisely the type of price action that we like to see from a market that is preparing for a potential move higher. As we've stated many times recently, the key now is to avoid distribution days as this could quickly weaken any potential rally.
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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