Stocks finished modestly higher on Tuesday, on mixed trade. All of the major exchanges ended the day higher, with the Nasdaq and S&P MidCap 400 leading the advance. Both indices closed up by 0.6%. The S&P 500 added 0.5%, while the small-cap Russell 2000 and the Dow Jones Industrial Average improved by 0.4% and 0.3% respectively.
In Tuesday’s newsletter we stated, “If the Direxion Daily Gold Miners 3x Bear ETF (NYSEARCA:DUST) can form either a reversal candle or an inside candle, then (we could be provided with) a buying opportunity” in DUST. Yesterday, DUST traded within its three day range and closed in the middle of its intraday range. This price action was accompanied by light volume, which is typical for an ETF or stock during consolidation prior to a significant move. A volume fueled move above the three day high of $50.25 could provide a buy entry trigger for this inverse ETF. We are placing DUST on the watchlist. Trade details are available to our subscribers in the watchlist section of the newsletter.
During the current round of selling in the broad market, the iShares Nasdaq Biotechnology ETF (NASDAQ:IBB) has shown excellent relative strength. Notice that IBB has held support of it 10-day MA, while the Nasdaq is currently hovering below its 20-day EMA. A volume assited move above the six day high of $128.91 could provide a buying opportunity in this ETF. We will continue to monitor IBB closely for a possible long entry.
All of our open ETF positions retraced modestly on Tuesday but remain well above key support levels. Yesterday’s modest recovery was of no surprise in the wake of Monday’s big sell off. Although the Nasdaq posted an accumulation day, the price action was far from impressive, and only twenty of one hundred and four sectors that we monitor finished up by more than 1.0%. We continue to hold a bearish bias but make sure to remind ourselves that one big accumulation day could shift the sentiment in the market quickly to the bull camp. We are also respectful that the market is once again approaching support of the 200-day MA.