Similar to the previous two days, stocks gapped higher on the open, pulled back in the morning, then chopped around in a sideways to slightly higher range throughout the rest of the day. Divergence among the major indices was noted, as the Nasdaq Composite gained 0.8%, but the Dow Jones Industrial Average showed relative weakness by finishing unchanged. The S&P 500 edged 0.2% higher. The small-cap Russell 2000 continued its newfound display of relative strength by cruising 1.2% higher and closing at a fresh 52-week high. The S&P Midcap 400 rose 0.7%.

As expected, volume limped in below the previous day’s levels, marking the stock market’s third consecutive day of gains on declining volume. Total volume in the NYSE eased 16%, while volume in the Nasdaq was 8% softer. Although several sectors have scored decent gains this week, the string of decreasingly lighter volume advances into a very long holiday weekend means intraday trading has been the safest bet.

The stock market’s open until 1:00 pm EST today, but turnover will likely be proportionately the lightest volume day of the year. In our humble opinion, there’s no need to think about entering new trades today, ahead of a three and a half day trading hiatus. You’re not likely to miss much. Set your stops for existing positions on the open, and make it a relaxing four-day weekend instead.

Holiday publication schedule: On Thursday, December 24, the stock market will close early, at 1:00 pm EST. That day, only an abbreviated version of The Wagner Daily will be published, primarily recapping any updates to open positions for subscribers. On Friday, December 25, the stock market will be closed for Christmas Day holiday, and The Wagner Daily will not be published that day. Regular publication will resume on Monday, December 28. Warmest wishes for a Merry Christmas, Happy Hanukkah, and Happy Kwanzaa from Morpheus Trading Group. Enjoy this peaceful time with your family and friends.

Open ETF positions:

Long – SMH
Short (including inversely correlated “short ETFs”) – EEV, FAZ

The commentary above is an abbreviated version of a daily ETF trading newsletter, The Wagner Daily. Regular subscribers receive daily updates on all open positions, as well as new ETF trade setups with detailed trigger, stop, and target prices. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit morpheustrading.com.

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.

DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter “The Company”) is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock’s actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter “The Newsletter”). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

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