Look For A Buying Opportunity In This ETF (DJP, PPH, IWM, QQQ, SPY, DIA)
Stocks recovered from Wednesday’s poor performance but on light trade. All five major indices closed up on the day but for the most part, off session highs. After recapturing most of Wednesday’s losses, the small-cap Russell 2000 (NYSEArca:IWM) plunged in the afternoon session and closed near session lows. After being up over 1.5% the Russell end up posting a meager 0.5% gain. The DJIA (NYSEArca:DIA) suffered a similar fate as it added 0.2% and closed near the day’s low. The S&P 500 (NYSEArca:SPY) tacked on 0.6%, while the S&P MidCap 400 rose 0.8%. The Nasdaq (NASDAQ:QQQ) closed higher by 0.7%. Homebuilders and airlines showed relative weakness, while financials, transportation and gaming all outperformed.
Internals ended the session mixed. Turnover dropped by 10.2% on the Nasdaq and 12.8% on the Big Board. Still, advancing volume outshined declining volume by a factor of 2.4 to 1 on the NYSE and 1.7 to 1 on the Nasdaq. The selling into strength yesterday and the fact that the Russell 2000 was pummeled into the close is cause for concern. If volume were higher, we would have been inclined to label yesterday as a distribution day. At a minimum, the lack of follow through in the market is making it quite difficult to trade.
Over the past two sessions, the iPath Dow Jones AIG Commodity ETN (NYSEArca:DJP) has formed back to back reversal candles, as it has tested support of its 10-day and 20-day moving averages. A move above the two day high of $44.69 could present a buying opportunity in this ETF. We are placing DJP on the watchlist. Trade details can be found in the watchlist portion of the newsletter.
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PPH closed near session highs yesterday but on unimpressive volume. If (NYSEArca:PPH) begins showing signs of weakness we may look to close the position. Profits have been hard to come by over the past few sessions and we are therefore inclined to take profits quickly due to the lack of follow through in the broad market.
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: deron@morpheustrading.com.
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