NYSE Posts Second Consecutive Distribution Day (SPY, DIA, XLI, UGA, IWM)
Stocks closed lower across the board on Thursday on mixed trade. All five major indices closed in the red. The S&P MidCap 400 led the decline as it slid 1.1%. The small-cap Russell 2000 (NYSEARCA:IWM) dropped 1.0%, while the S&P 500 (NYSEARCA:SPY), Dow Jones Industrial Average (NYSEARCA:DIA) and Nasdaq slid 0.7%, 0.6% and 0.4% respectively. Only twenty of the 103 sectors that we cover finished up on the day and only one sector closed more than one percent higher. The weakest sectors included coal, transportation, insurance and non ferrous metals.
Market internals once again ended the day mixed. Traded quickened on the NYSE by 6.8% but fell on the Nasdaq by 2.0%. Declining volume overpowered advancing volume on the NYSE by a ratio of 5.8 to 1. The damage was not as bad on the Nasdaq as declining volume topped advancing volume by just over 2 to 1. For the second time in as many days, the NYSE fell under distribution. However, the Nasdaq once again escaped a distribution day due to the light volume on the technology rich index.
Yesterday, on a significant uptick in volume, the S&P Select Industrial SPDR Fund (NYSEARCA:XLI) formed a reversal candle as it undercut support of the 50-day MA. A move above yesterday’s high of $37.25 could present a buy entry trigger for XLI. We will be monitoring this setup closely for a possible long entry.
Earlier this week we stated that the Gasoline ETF (NYSEARCA:UGA) was showing relative strength as it consolidated along its 20-day EMA. Further we noted that UGA was setting a sequence of higher lows during this consolidation. It is also noteworthy that UGA has been consolidating as volume is contracting. This is generally considered a bullish signal. Yesterday, UGA once again tested and held support at its 20-day EMA. We like the price action and relative strength in this ETF and are therefore placing it on the watchlist. Trade details are available to our subscribers in the watchlist section of the newsletter.
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 September 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: firstname.lastname@example.org.