Wagner Daily Lite for March 2, 2012 – Breakout Setup in $DJP

Stocks recovered from Wednesday’s poor performance but on light trade. All five major indices closed up on the day but for the most part, off session highs. After recapturing most of Wednesday’s losses, the small-cap Russell 2000 plunged in the afternoon session and closed near session lows. After being up over 1.5% the Russell end up posting a meager 0.5% gain. The DJIA suffered a similar fate as it added 0.2% and closed near the day’s low. The S&P 500 tacked on 0.6%, while the S&P MidCap 400 rose 0.8%. The Nasdaq closed higher by 0.7%. Homebuilders and airlines showed relative weakness, while financials, transportation and gaming all outperformed.

Internals ended the session mixed. Turnover dropped by 10.2% on the Nasdaq and 12.8% on the Big Board. Still, advancing volume outshined declining volume by a factor of 2.4 to 1 on the NYSE and 1.7 to 1 on the Nasdaq. The selling into strength yesterday and the fact that the Russell 2000 was pummeled into the close is cause for concern. If volume were higher, we would have been inclined to label yesterday as a distribution day. At a minimum, the lack of follow through in the market is making it quite difficult to trade.

Over the past two sessions, the iPath Dow Jones AIG Commodity ETN (DJP) has formed back to back reversal candles, as it has tested support of its 10-day and 20-day moving averages. A move above the two day high of $44.69 could present a buying opportunity in this ETF. We are placing DJP on the watchlist. Trade details can be found in the watchlist portion of the newsletter.

PPH closed near session highs yesterday but on unimpressive volume. If PPH begins showing signs of weakness we may look to close the position. Profits have been hard to come by over the past few sessions and we are therefore inclined to take profits quickly due to the lack of follow through in the broad market.

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