Potential short setups in (XLY) and (GMF) – The Wagner Daily
The Wagner Daily – March 21, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Equities edged higher on Friday, a quadruple witching options expiration day. The session brought divergence to the market, as small cap stocks vastly outperformed all other groups. The small-cap Russell 2000 closed the day up 1.4%, while the Nasdaq and the S&P MidCap 400 could only manage modest gains of 0.3% and 0.5% respectively. The S&P 500 scrapped its way to a 0.4% improvement, while the Dow Jones Industrial Average posted a 0.7% gain for the day.
Trade was heavy on Friday but this would be expected given options expiration. Nasdaq volume rose by 29.5%, while the NYSE saw an increase of 52%. Advancing volume modestly out performed declining volume across both indices. The advancing volume to declining volume ratio ended the day at 2.4 to 1 on the NYSE and 1.4 to 1 on the Nasdaq. Due to options expiration, we would not consider Friday as an accumulation day for market.
The SPDR Consumer Discretionary Select Sector ETF (XLY) demonstrated significant relative weakness on Friday. It opened at the high and closed near the low of the day. A volume fueled move below the three day low of $37.38 could provide a shorting opportunity for this ETF. XLY is being placed on the watchlist. For our subscribing members, trade details are available in the watchlist segment of the newsletter.
In Friday’s newsletter we stated, “The SPDR S&P Emerging Asia Pacific ETF (GMF) has lost support of the 200-day MA for the second time in as many months. Yesterday, this ETF closed near the low of the session on strong volume. A drop below the three day low of $78.35 could result in significant downside for GMF“. On Friday, GMF continued to exhibit relative weakness and we are now placing it on the watchlist. Trade details are available in the watchlist.
Although we follow the $COMPX in the newsletter, it is noteworthy that the Nasdaq 100 actually closed down 0.2% on Friday. This provides further indication the market may be weakening.
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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