The Certainty Of Uncertainty (SLV, EWJ, QQQ, DIA, SPY, IWM)

Stocks fell for a third consecutive day yesterday as volume rose. All five major indices ended the session modestly lower but near the lows of the session. The Nasdaq (NASDAQ:QQQ) struggled the most as it shed over 0.7%. The Dow Jones Industrial Average (NYSE:DIA) and the small-cap Russell 2000 (NYSE:IWM) both slid 0.5%. The S&P MidCap 400 and the S&P 500 (NYSE:SPY) both dropped 0.4%.

For a second consecutive day internals were negative. Volume was up by 13.6% on the Nasdaq and by 11.6% on the NYSE. Once again declining volume controlled the day’s action as it outpaced advancing volume by a ratio of 2.1 to 1 on the NYSE and 2.9 to 1 on the Nasdaq. The increase in volume across both exchanges points to institutional participation in the decline. We would classify yesterday as both a distribution day and a follow through day on Wall Street.

Yesterday, via intraday alert we entered a position in the iShares Silver Trust (NYSE:SLV). After gapping down in the morning SLV undercut support of the 20-day MA and rallied back into the four day trading range to form a bullish reversal candle. Further, this move occurred on increasing volume. Trade details are available to our subscribers in the open positions segment of the newsletter.

Yesterday, on a big spike in volume, (NYSE:EWJ) formed a distinct reversal candle as it overcut the 200-day MA but eventually reversed to close near session lows. A move back below yesterday’s low of $10.47 could provide a shorting opportunity in this ETF.

The market continued its pattern of indecision yesterday as it made last week’s advance seem like a distant memory. However, if we take a step back from the price action it is clear that we are coming into support of the 20-day and 50-day moving averages on the major indices. The next two sessions of trading are likely to provide the clues as to the internal strength of the market.

The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. 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

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: [email protected]

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