A Bullish Signal – (SPY) (QQQ)- The Wagner Daily
The Wagner Daily – October 19, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Stocks reversed sharply yesterday to score a bullish reversal and confirmation day. The major indices all closed higher. The small-cap Russell 2000 led the surge as it jumped 3.0%. The S&P MidCap 400 added 2.3% while the S&P 500 closed higher by 2.0%. Both the Nasdaq and Dow Jones Industrial Average tacked on 1.6%.
Market internals were bullish yesterday. Volume spiked by 15.0% on the Nasdaq and 22.0% on the NYSE. Advancing volume topped declining volume by a ratio of 12.6 to 1 on the NYSE and 5 to 1 on the Nasdaq. As discussed earlier, yesterday was a bullish reversal, accumulation and confirmation day for the market. The spike in volume points directly to institutional buying.
Despite all of the positive action coming out of the market, as swing traders we are still inclined to take a conservative approach to entering the market on the long side for several reasons. A quick glance at the charts of the Nasadaq and the S&P 500 shows that we are near considerable resistance on both indices. It is also important to take into consideration that there are still very few stocks exhibiting signs that they are ready to break to new highs. The price action still needs to tighten up for quality patterns to develop. In the meantime we expect to see a continuance of the whippy price action which makes trading difficult.
Due to the whipsaw price action we raised the stop in EUO to just below breakeven. We now have an early short term buy signal in place but we’re not that anxious to jump in full force without more quality stock setups and in particular tightening of price action. There’s still a great deal of volatility in the market and price consolidation is what’s needed to form the base from which to launch a sustainable rally. It is also noteworthy that AAPL had its first earnings miss in almost six years. This could have a muting affect on the Nasdaq.
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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