Buying Opportunity In This Dow Jones US Real Estate Index ETF? (IYR, EWM, IWM, DIA, SPY, QQQ)
Stocks ended the session mixed, as large cap issues outperformed. The Nasdaq (NASDAQ:QQQ) set a fresh 52-week closing high on Tuesday as it tacked on 0.7%. The S&P 500 (NYSEArca:SPY) posted a 0.3% gain, while the DJIA (NYSEArca:DIA) eked out a 0.2% advance. The small-cap Russell 2000 (NYSEArca:IWM) and the S&P MidCap 400 were the day’s laggards as they posted losses of 0.3% and 0.2% respectively. The home construction, real estate and transportation sectors all struggled on Tuesday, while the airline, precious metal and semiconductor sectors all fared well.
Market internals ended the session mixed. Turnover slid on the NYSE by 2.4% but rose on the Nasdaq by 2.5%. However, advancing volume topped declining volume on both exchanges. By the closing bell the spread ratio stood at a plus 1.2 to 1 on the NYSE and a plus 1.6 to 1 on the Nasdaq. The Nasdaq posted an accumulation day yesterday, as the tech-rich index closed up on both higher advancing volume and total volume.
Since rallying above its 200-day MA in early February, the iShares MSCI Malaysia Index ETF (NYSEArca:EWM) has been consolidating along its 10-day MA and 20-day EMA. This type of “base building” action is important, as it serves as the launching pad for the next potential move higher. A volume fueled move above the three day high of $14.60 could provide a buying opportunity in EWM.
Since setting a 52-week high on February 3rd, the iShares Dow Jones US Real Estate Index ETF (NYSEArca:IYR) has pulled back into support of its 20-day EMA. On Monday, IYR formed a distinct reversal candle on a surge in volume. Then yesterday, IYR attempted to rally above this reversal bar but instead, sold off, to close near session lows. Over the past five sessions, IYR has found resistance near $60.80 and support near $59.80. A rally above yesterday’s high of $60.80 could provide a buying opportunity in this ETF. We are placing IYR on the watchlist. For our subscribers, trade details are posted in the watchlist section of the newsletter.
PPH broke out of its trading range yesterday, establishing a new 52-week high. IAU continued its march higher as it gapped up and rallied for most of the day. IYM showed strength in the morning session but was met with a surge of afternoon selling that left it near session lows, by the closing bell. Although the Nasdaq managed to sneak in an accumulation day, market bulls were not able to definitively wrestle control of the market. If the S&P MidCap 400 and small-cap Russell 2000 can break out of their respective trading ranges, then the market will likely see a more authoritative rally.
Deron Wagner is a professional hedge fund manager who founded Morpheus Trading Group, a swing trader education firm, in 2002. He is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis. His new book, Advanced Technical Analysis of ETFs, will be released in August 2012. Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is also a frequent guest speaker at various trading events around the world, and can be reached by sending e-mail to: email@example.com.