Are We Heading Higher? – (USO) (XHB) – The Wagner Daily
The Wagner Daily – December 7, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:Commentary:
On an uneventful day in the markets, stocks ended the session mixed on light trade. The Dow Jones Industrial Average showed the most resiliency as it posted a 0.4% gain. The S&P 500 tacked on 0.1%, as the small-cap Russell 2000 closed at the breakeven mark. The Nasdaq slid by 0.2% while the S&P MidCap 400 was the day’s loser, as it shed 0.3%.
Market internals ended mixed on the day. Turnover fell across the board. On the Nasdaq, trade dropped by 11.6% and on the NYSE it fell by 10.6%. For the first time in recent memory, advancing volume closed dead even with declining volume on the NYSE. However, declining volume held the upper hand on the Nasdaq as it outpaced advancing volume by a ratio of 1.5 to 1. Tuesday’s light volume points to an absence of institutional participation in the day’s action.
Recently, the SPDR S&P Homebuilders ETF has exhibited excellent relative strength to the broad market, as it has reclaimed support of its 200-day MA. If XHB can consolidate for a few days above this key mark, then it becomes more likely that the next move will be higher. We will be monitoring this ETF closely as a potential long candidate.
Since reclaiming its 200-day MA on November 10th, the United States Oil Fund ETF (USO) has formed a bullish cup and handle like pattern, and now appears ready for a move higher. A rally above the December 5th high of $39.50 could provide a buy entry trigger for this ETF. We are placing USO on the watchlist. Trade details are available in the watchlist segment of the newsletter for our subscribers.
Our open positions in EUO and GDXJ performed well early in the session, but then reversed later in the day. However, both ETFs made their intraday moves on light volume. For the fourth consecutive day, all of the major indices have been consolidating above their respective 200-period moving averages on the 60-minute chart. Typically, the longer this type of consolidation continues, the more likely the next move will be higher.
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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