Relative Strength in (UYG) – The Wagner Daily
The Wagner Daily – December 27, 2010
Concise technical analysis and picks of the leading global ETFs
Commentary:
Stocks were down modestly on Thursday, with four of the five major indices closing in the red. For the first time in many sessions, the Dow Jones Industrial Average was the only major index to close up on the day. The blue chip index eked out a 0.1% gain yesterday. The S&P 500, Nasdaq, small-cap Russell 2000 and the S&P MidCap 400 all shed 0.2% on the session. As would be expected two days before a holiday, trading was uneventful.
Volume was down sharply on both the Nasdaq and the NYSE ahead of the Christmas holiday. Turnover on the Big Board plummeted by 18%. The Nasdaq saw an even sharper decline of 21%. Declining volume outpaced advancing volume on the NYSE by a ratio of 1.8 to 1. On the Nasdaq, advancing volume ended the day at par with declining volume. Our position in GSG performed particularly well against the broad market on Thursday. On almost twice the 50-day volume moving average, GSG set a new 52 week high. Given the 18 month base of support established in GSG, there is very little resistance between the breakout at $33.55 and the 200-day MA ($39.45).
Although the Ultra Financials ProShares ETF (UYG) has lagged the market over the past 18 months, it has exhibited relative strength recently, and is now testing key resistance near $65.50. If the broad market and volume cooperate, this ETF could see a healthy rally. A move above the December 22nd high ($66.61) may provide a buying opportunity for UYG. Since UYG has only recently demonstrated relative strength, a substantial increase in volume is likely necessary for the advance to continue.
The iShares S&P 500 Value Index ETF (IVE), has been in strong rally mode since July. However, just above the December 22nd high of $59.87 looms significant resistance. A quick look at the daily, weekly and monthly charts provides a clear picture of the obstacle facing IVE. The confluence of Fibonacci resistance, the 200-week MA and the 50-month MA (at $60.50 – $61.00) suggest that IVE will likely be met with selling pressure at this price range. Further, odds favor a pullback or an extended period of consolidation before (or if) IVE were to continue its 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: deron@morpheustrading.com.
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