Better Safe Than Sorry – (FDN)(EIDO) – The Wagner Daily
The Wagner Daily – November 14, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
Stocks surged higher on Friday as trade slid. All five major indices closed higher by 2.0% or more. The small-cap Russell 2000 was the day’s biggest winner as it tacked on 2.7%. The S&P MidCap 400 climbed 2.3% while the Dow Jones Industrial Average improved 2.2%. Both the Nasdaq and the S&P 500 ended the session up by 2.0%.
For a second time in as many days, market internals were mixed. Advancing volume significantly outpaced declining volume on both exchanges. By the closing bell the spread ratio stood at +15.9 to 1 on the NYSE and +5.6 to 1 on the Nasdaq. However, trade plunged across the board. Volume on the Nasdaq fell over 16.0% and on the NYSE by 18.7%. The light volume suggests that institutional investors were not active on Friday and casts doubt on the strength of the move.
The First Trust Dow Jones Internet ETF (FDN) has been setting a sequence of higher lows along its 20-day EMA, as it has consolidated below the 200-day moving average. A move above the November 8th high of $34.62 could present a long opportunity in this ETF. Ideally, we would like to see FDN’s price action tighten up just below the 200-day MA prior to the next breakout attempt.
Since its second attempt on November 11th to reclaim the 200-day moving average, the iShares MSCI Indonesia Investable Market ETF (EIDO) has seen tightening price action and on Friday closed above this key mark. A move above the three day high of $30.49 offers a potential buy entry trigger for this ETF (1/3rd position size). There is further potential to add to the position above the November 8th high of $30.83.
It continues to be difficult to extract profits from the market. Every time it appears the market is gaining upside momentum, a big distribution day creeps in to slow things down. If there were not so many distribution days in the past two weeks we likely would have been more inclined to stay in our long positions. However, if we are in the first stage of a bigger move higher, there will be plenty of time to profit from the move. It the meantime, it is prudent to protect capital when the market gets whippy.
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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