Relief On The Way? – The Wagner Daily
The Wagner Daily – June 9, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Stocks finished lower on Wednesday amidst brisk trade. By the closing bell the S&P 500 had closed down for the sixth consecutive day. The selling was broad based with Chinese stocks taking an absolute pounding. The Nasdaq, S&P MidCap 400 and small-cap Russell 2000 all plummeted 1%. However, the S&P 500 and the Dow Jones Industrial Average showed some signs of life by containing losses to 0.4% and 0.2% respectively.
Internals were decidedly bearish on Wednesday. Volume spiked 13% on the Nasdaq and 10.2% on the NYSE. Declining volume once again overpowered advancing volume on both major exchanges. The spread ratio ended the session at 3.3 to 1 on the NYSE and 5.2 to 1 on the Nasdaq in favor of declining volume. Given the broad based selling, negative spread ratio and negative price action, we would classify Wednesday as a distribution day in the market.
From August of 2010 until early March of 2011 the Direxion Energy Bear 3X Shares leveraged ETF (ERY) was in a severe downtrend. However on March 10th of this year ERY broke the downtrend. Since that time ERY has been consolidating as it has set a higher high and a higher low. A volume fueled move above the three day high of $16.27 could provide a buying opportunity in this ETF.
In yesterday’s newsletter we stated that “…the iShares MSCI Turkey Investable Market Index ETF (TUR)…formed a bearish reversal candle and closed at the low of the day. (Tuesday’s) move back into resistance of the 20-day EMA now places TUR on the table as a possible short candidate. Ideally we would like to see TUR consolidate at the current level for several days and make one more move to challenge resistance at today’s high. A second test and reversal off of this high could provide a short trigger for TUR. TUR might also provide a shorting opportunity with a small rally followed by a reversal below today’s low”. Yesterday, TUR chose the second course of action as it retested the 20-day EMA and reversed to close below Tuesday’s low. We are placing TUR on the Watchlist. Trade details are available to our subscribers in the watchlist segment of the newsletter.
The broad market appears headed for the 200-day moving average. However, with six days of vicious selling on the board we are inclined to be selective and cautious with respect to entering new short positions. We expect the market to see a relief rally sometime in the next two sessions. We also anticipate sector rotation out of emerging market and Energy ETFs.
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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