Options Expiration Tranquility – The Wagner Daily
The Wagner Daily – July 18, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Equities closed higher on options expiration Friday but on mixed trade. Although all five major indices closed in positive territory they all finished lower for the week. The tech-rich Nasdaq showed the most strength as it gained 1.0% yesterday. The small-cap Russell 2000 posted a 0.9% gain while both the S&P MidCap 400 and S&P 500 improved by 0.6%. The Dow Jones Industrial Average posted a modest gain of just over 0.3%.
Market internals ended the session mixed. Volume rose by 15.2% on the Big Board but slipped 6.6% on the Nasdaq. Advancing volume edged out declining volume on the NYSE by a ratio of 1.3. On the Nasdaq the ratio fell in favor of advancing volume but by a wider margin of 2.9 to 1. The increase in volume combined with a positive spread ratio suggests institutional accumulation on the NYSE. The same cannot be said for the Nasdaq as volume fell on higher beta index.
A quick review of the 60-minute chart of both the S&P 500 ($SPX.X) and the Nasdaq ($COMPX) shows that we stabilized and rallied into the four day downtrend line on both indices on Friday. Both exchanges now have established support at the two day low and resistance at the three day high. A move above or below these key levels will likely determine the next significant move in the market. We will be watching the sixty minute chart carefully over the next several days.
The iShares MSCI South Korea Index ETF (EWY) has been consolidating for the past three days at support of the 20-day EMA and 50-day MA. A move back above the two day high of $66.06 could provide a long entry trigger for EWY. We are placing EWY on the watchlist. Trade details are available to our subscribers in the watchlist segment of the newsletter.
All in all, options expiration Friday was a lackluster day on Wall Street. Typically heavy volume follows options expiration but Friday provided an exception. For the past four sessions the S&P 500 has managed to undercut but nonetheless hold onto critical support of the 20 and 50 day moving averages. If the broad market can hold this key mark we expect to see a move higher early in the week.
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.
