Treasury Bond ETFs breaking out – The Wagner Daily

 

 

 

Yesterday’s session was relatively uneventful, as the major indices failed to extend much beyond the opening fifteen minute bar’s range in either direction. Small and mid-cap stocks showed relative strength early, but failed to produce anything positive in the afternoon. The Dow Jones Industrial Average and Nasdaq Composite closed slightly lower at 0.1%. The S&P 500 and S&P Midcap 400 indices each lost 0.2%. The Russell 2000, which has been a bit more active over the past few days slid 0.6%.

The tight-ranged action was accompanied by very light volume, as turnover finished around 30% below the 50-day moving average of volume on both exchanges. We could see a full week of uninspiring price action, as traders lay low ahead of the upcoming extended holiday weekend.

SPDRs S&P 500 (SPY) has formed a tight trading range on the hourly chart below:

100629SPX.gif

We would expect any potential rally in the SPY to be short lived, especially if the bearish volume pattern of the past few weeks persists. There is significant overhead resistance from the 200-day moving average and the downward sloping 50-day moving average around the 11.50 to 112.50 area (point B). That’s assuming the price action is strong enough to break above the 20-day EMA around 110.00 (point A).

100629SPY2.gif

Retails stocks provided market leadership during the last rally. Now the SPDR S&P Retail (XRT) is sitting below its 200-day moving average and showing relative weakness to the S&P 500 over the past month. On the chart below we see the S&P 500 making (or attempting to make) a higher high and two higher lows, while XRT continues to make lower highs and lower lows. Even if the market is able to recover and produce a meaningful rally, it’s doubtful that XRT will play a meaningful role.

100629XRT2.gif

Bond ETFs are showing significant strength as of late. Money flowing into bonds signals that investors are shying away from risk, which is a negative sign for stocks. Our TLT long position is working its way toward a bullish breakout above the highs of the range with yesterday’s close:

100629TLT.gif

Here is more strength from the iShares 7-10 Year Treasury (IEF):

100629IEF.gif

Open ETF positions:

Long – TLT, UNG, UUP
Short (including inversely correlated “short ETFs”) – USO

twitterbutton-0204.gif
The commentary above is an abbreviated version of a daily ETF trading newsletter, The Wagner Daily. Regular subscribers receive daily updates on all open positions, as well as new ETF trade setups with detailed trigger, stop, and target prices. 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.

DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter “The Company”) is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock’s actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter “The Newsletter”). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

Charts created by TradeStation (tradestation.com).

© 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.