Wagner Daily: The Market Takes A Breather (DTO, GLD, IWM, SPY, DIA, QQQ)

Stocks ended the day mixed on light trade. The market was down modestly in the morning session but recovered in the afternoon to close near break even. On relatively quiet day the small-cap Russell 2000 (NYSE:IWM) slid 0.4% as the Dow Jones Industrial Average (NYSE:DIA) fell 0.3%. The S&P 500 (NYSE:SPY) closed just over 0.1% lower while the S&P MidCap 400 ended the day flat. The Nasdaq (NASDAQ:QQQ) was the only index that closed in the green as it tacked on 0.2% yesterday.

Market Internals were mixed on Thursday. Volume was lower on both exchanges. The Nasdaq saw turnover drop by almost 15% while it fell just over 10% on the Big Board yesterday. Declining volume was higher than advancing volume by 1.2 to 1 on the NYSE. However, advancing volume outpaced declining volume on the Nasdaq by a factor of 1.3 to 1. Thursday’s lackluster internals suggest that institutions were not actively involved in the session.

The PowerShares DB Crude Oil Double Short ETF (NYSE:DTO) has been consolidating above its 20-day EMA since breaking out on May 5th. Yesterday DTO attempted to move to higher ground but was met with resistance and returned to the trading range. Should this ETF continue to consolidate at the current level, a move back above yesterday’s high of $48.77 could provide a buying opportunity. We are following this setup closely for a potential long entry in this inverse ETF.

Over the past two weeks the SPDR Gold Trust ETF (NYSE:GLD) has been maintaining support along its 20-day EMA. Yesterday, GLD undercut its three day low, kissed off the 20-day EMA and quickly returned to the trading range. A volume fueled move back above yesterday’s high near $150.45 could provide a buy trigger for GLD.

Following two sessions of whipsaw trading, Thursday’s action was uneventful. We remain concerned over the market’s ability to hold support at the current levels and continue to suggest caution on the long side 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 morpheustrading.com.

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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