Wagner Daily: Tip Toe Through The Tulips (USO, EWS, IWM, DIA, SPY, QQQ)

US equities closed down on Monday on mixed trade. All five major indices ended the day in the red. The small-cap Russell 2000 (NYSE:IWM) realized the biggest loss as it fell just over 1.1%. The S&P MidCap 400 shed 0.8% while the Dow Jones Industrial Average (NYSE:DIA) fell 0.7%. Both the Nasdaq (NASDAQ:QQQ) and the S&P 500 (NYSE:SPY) dropped 0.6% yesterday.

Market internals ended the session mixed for a second consecutive day. Volume fell by 3.4% on the Nasdaq but rose by 3.9% on the NYSE. However, declining volume outpaced advancing volume on both exchanges. By the closing bell the spread ratio stood at 3.5 to 1 on the NYSE and 1.9 to 1 on the Nasdaq in favor of down volume. The combination of higher total volume and higher declining volume suggest that institutions were actively involved in Monday’s selling activity on the NYSE. However the light volume on the Nasdaq eliminates the possibility of distribution on the tech rich index.

Since finding its footing in late June the United States Oil Fund ETF (NYSE:USO) has spent the last three sessions consolidating at resistance near the 200-day MA. In this timeframe USO has formed two distinct reversal candles as it has probed above the 200-day MA. A move below the three day low of $38.46 may provide a short entry trigger for this ETF.

Since undercutting its 200-day MA six days ago, the iShares MSCI Singapore Index Fund ETF (NYSE:EWS) has quickly rallied back into key resistance at $14.29. A volume assisted move back below yesterday’s low of $14.14 could provide a shorting opportunity in this ETF. Since EWS is in a long term uptrend this trade involves higher risk and if entered would only be intended as a two or three day reversal play.

Given the stalemate in Washington it is somewhat surprising how resilient the market was on Monday. However, similar to Friday’s action, Monday’s trade also seemed to be mired in confusion. Markets don’t like uncertainty and until the budget, debt and deficit matters are resolved we expect more of the same in the coming days. Again, we recommend caution as Congress tip toes its way forward.

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]

DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter “The Company”) is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock’s actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter “The Newsletter”). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.

Leave a Reply

Your email address will not be published. Required fields are marked *