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Bullish Confirmation Day for SPY, QQQ and DIA (FAS) - January 19, 2012

|Includes: DIA, Direxion Daily Financial Bull 3x Shares ETF (FAS), QQQ, SPY
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The Wagner Daily - January 19, 2012
Concise technical analysis and picks of the leading global ETFs



Commentary:

Wednesday was a good day on Wall Street, as stocks surged higher and closed near session highs. Four of the five major indices that we track closed more than one percent higher. The DJIA was the sole holdout. The blue chip index lagged on the session but still managed a 0.8% gain. High beta stocks led the charge as the small-cap Russell 2000, S&P MidCap 400 and the Nasdaq climbed 1.8%, 1.6% and 1.5% respectively. The S&P 500 tacked on a solid 1.1%. Semiconductor, emerging market, retail and most technology ETFs showed the most relative strength yesterday. On the other hand, natural gas, utilities, oil and precious metals were underperformers on the session.

Market internals were strong on Wednesday, confirming the bullish price action. Volume spiked on the Nasdq by 11.8%, while on the NYSE it rose by a modest 1.1%. However, the ratio of advancing volume to declining volume was greater on the NYSE. By the closing bell the spread ratio stood at plus 5.8 to 1 on the Big Board and plus 3.4 to 1 on the Nasdaq. With all internals pointing in the same direction, it was clearly an accumulation day on Wednesday. The rising volume suggests institutional buying.

The Direxion Daily Financial Bull 3x Shares (NYSEARCA:FAS), on a burst of volume yesterday, rallied to close just below the four day high of $77.63. FAS has been consolidating in tight range for the past six sessions just above its 10-day moving average. In a strong market, it is not unusual for ETFs to track the 10-day, rather than the 20-day moving average, for extended periods of time. This ETF is on the cusp of breaking out. If the market cooperates and FAS sees solid volume tomorrow, it could present a buying opportunity above the four day high. We are placing FAS on the watchlist. Trade details can be found in the watchlist section of the newsletter.



All of our positions moved higher yesterday, and based upon the close, it appears as if we should see upside follow through tomorrow. TNA performed particularly well, as it surged 5.2%. Yesterday's accumulation day placed a bullish stamp of approval on the market. Although we would not be surprised to see a pullback sometime soon, the bulls appear to be clearly in control of the market.


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 morpheustrading.com.

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: deron@morpheustrading.com.



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