Even Bears Bounce – The Wagner Daily
The Wagner Daily – June 8, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
For much of the session it appeared as if stocks would trim recent losses but a late wave of selling erased any hopes of a positive day for the broad market. Still, the small-cap Russell 2000 and the S&P MidCap 400 both managed to post 0.4% gains yesterday. The Nasdaq ended the day fractionally lower while the S&P 500 and the Dow Jones Industrial Average slid 0.1% and 0.2% respectively.
For the second day in a row market internals ended the day mixed. Trade was down slightly across the board. By the closing bell, volume on the NYSE had slid just over 3% while on the Nasdaq it dropped 1.4%. Advancing volume ended the day just about at parity with declining volume. Both the NYSE and the Nasdaq saw advancing volume outpace declining volume by a meager 1.1 to 1. Although the market closed bearishly, we would not consider Tuesday to be a distribution day as volume was light and advancing volume was greater than declining volume. Nonetheless, it was not encouraging that the market has been unable to rebound even slightly over the past 5 days.
Since losing support of the 20-day EMA on May 6th, the iShares MSCI Turkey Investable Market Index ETF (TUR) gapped up into this key moving average for the first time yesterday. Further, it formed a bearish reversal candle and closed at the low of the day. Today’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. We are monitoring TUR closely for a possible short entry.
For the second time in as many weeks the PowerShares DB Base Metals ETF (DBB) has found resistance at the 50-day moving average. Yesterday DBB overcut this key average and reversed to close near the session low. A move below yesterday’s low of $23.88 could provide a shorting opportunity in this ETF. We are placing DBB on the watchlist. Trade details are available to our subscribing members in the watchlist segment of the newsletter.
Given that the market has been under selling pressure for five consecutive sessions, we would not be surprised to see a relief rally on Wednesday. Many of the technical indicators that we use are suggesting that the market has reached over-sold levels. However, this does not eliminate the possibility that the markets may just consolidate at current levels before possibly moving lower.
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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