Stocks finished strong for the second consecutive day on increasing volume. The tech rich Nasdaq led the advance by posting an impressive 1.4% gain on the session. Yesterday’s move in the Nasdaq brought the index within a whisker of its 50-day MA. The S&P MidCap 400 posted a 1% advance, as the S&P 500 rose by 0.9%. The Dow Jones Industrial Average and the small-cap Russell 2000 ended the day higher by 0.7% and 0.6% respectively.
Market internals were mixed on Thursday. Volume increased on the Nasdaq by 13.9%, but volume dropped off by 1.3% on the NYSE. Advancing volume topped declining volume by a ratio of 3.6 to 1 on the NYSE and 3.9 to 1 on the Nasdaq. Thursday’s internals suggest a second consecutive day of institutional accumulation for the Nasdaq. The lighter volume on the NYSE prevented the S&P 500 from logging a bullish accumulation day.
Yesterday we issued an intraday alert placing the Oil Service HOLDRS ETF (NYSE:OIH) on the watchlist. This potential long position has not yet triggered. For our subscribing members, trade details can be found in the watchlist segment of the newsletter.
The iShares Dow Jones Transportation Average Index ETF (NYSE:IYT) has shown relative strength during the recent market turmoil. IYT is now consolidating at a key resistance level first tested on March 9th. A move above the four day high of $93.82 may present a buying opportunity in this ETF.
The market has shown resiliency since the devastation in Japan. However, a big test of how strong the market is should become clear over the next several trading days. The Nasdaq is still lagging the other major indices and we are now at key resistance levels across the broad market. Caution is warranted for both bears and bulls.
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]