Stocks traded in a tight range on Monday as they consolidated for a second consecutive day on light volume. The Nasdaq was the only major index to close in positive territory but the losses incurred elsewhere were slim. The technology rich index ended the session higher by 0.2%. The Dow Jones Industrial Average (NYSE:DIA), S&P 500 (NYSE:SPY) and small-cap Russell 2000 all slid 0.2% while the S&P MidCap 400 fell a more modest 0.1% on the day.
For a second straight session market internals finished mixed. Volume was down across the board. Turnover on the Big Board fell by 14% while Nasdaq volume was lower by 22% yesterday. Declining volume outpaced advancing volume on the NYSE by a factor of 1.6 to 1 but on the Nasdaq advancing volume held the advantage by a factor of 1.7 to 1. Monday’s internals suggest another day of consolidation for the market as institutions showed little interest in wholesale buying or selling.
The Global X Uranium ETF (NYSE:URA) continues to struggle in finding traction off the recent low. Further, this ETF has formed a sequence of lower highs as it rides below its 20-day EMA. This bearish pennant-like formation could invite selling activity should URA lose support of yesterday’s low at $14.71.
The Guggenheim Canadian Energy ETF (NYSE:ENY) has recently formed a bullish pennant-like formation. Yesterday this ETF sold off on light volume and it appears likely that it may undercut both the 20-day EMA and 50-day Moving Average. A move back above yesterday’s high of $22.99 may provide a buy signal for ENY. We are monitoring ENY closely for a possible buy entry.
Volume was down significantly for the second straight session on Monday. Given last week’s impressive performance it is not unusual to see the type of price and volume action exhibited by the market yesterday. Light volume accompanying price consolidation following a strong rally is generally considered a bullish signal.
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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