iShares Real Estate (IYR) showing relative strength


Trapping the bears who took advantage of the previous afternoon’s weakness, stocks roared back with a strong round of broad-based gains yesterday. The major indices gapped higher on the open, drifted sideways into mid-day, then made another leg higher in the afternoon. The benchmark S&P 500 Index scored a 3.0% gain. Both the Nasdaq Composite and Dow Jones Industrial Average jumped 2.8%. The small-cap Russell 2000 and S&P Midcap 400 indices zoomed higher by 3.5% and 3.2% respectively. Completely opposite of the prior day’s session, all the main stock market indexes closed at their intraday highs.

Curiously, one key element missing from yesterday’s rally was the presence of higher turnover. Total volume in the NYSE was approximately 12% lighter than the previous day’s level, while volume in the Nasdaq slipped 5%. With such large percentage gains, one might have expected the rally to be driven by institutional accumulation, but slower trade across the board tells us mutual funds, hedge funds, and other institutions were not really interested in participating. Nevertheless, market internals were extremely strong. Advancing volume in the NYSE destroyed declining volume by a huge margin of 40 to 1. Every industry sector on our daily watchlist closed in positive territory yesterday, which wasn’t surprising given the large gains across the board.

Yesterday’s rally caused our long position in iShares Thailand Index (THD) to gain 2.6% and confirm the breakout above its intermediate-term downtrend line. Showing clear relative strength to the broad market, THD is still one of the very few ETFs of the more than 300 we monitor that is trading above its 20, 50, and 200-day moving averages. If the U.S. stock market continues to recover, THD should show leadership and move to a new 52-week high in the near to intermediate-term. But unfortunately for the bulls, we’re still not seeing much in the way of other buyable ETF chart patterns. One exception is iShares Real Estate Index (IYR), which recently formed a near-term double bottom at its 200-day moving average, is trading above its 20-day EMA, and is within striking distance of moving back above its 50-day MA. Take a look:


A rally above the $51 area is a potential trigger point for buy entry, as that would correlate to a rally above its prior “swing high” from May 28, as well as convergence of its 50-day MA. Still, as with all entries on the long side of the market right now, tight stops are recommended in order to protect against failed breakouts.

After such a significant decline in the broad market over the past month and a half, it’s easy to get encouraged by a 3% gain in the S&P 500. However, it’s important to remember that such substantial percentage moves have not been uncommon since the recent stock market decline began. Specifically, since the late April highs in the S&P, the index has had nine days of moves that resulted in a gain or loss of more than 2% (five down, four up). As such, it’s pointless to read much into yesterday’s advance, as stocks are still rebounding off their recent lows. Furthermore, the lighter volume was discouraging. The major indices may again be attempting to find their footing on a short-term basis, just as they did in late May, but the intermediate-term trends clearly remain “down.” Very near-term traders may find select opportunities in some of the ETFs with relative strength, but our overall plan is to wait for weak ETFs to forge a substantial bounce into major overhead resistance levels, such as their 50-day moving averages, then initiate new short positions.

Today’s Watchlist:

There are no new setups in the pre-market today. We’re considering a new short entry into USO, as it rallies into major overhead resistance, and we’ll send an Intraday Trade Alert with details IF we decide to enter it today.

Daily Performance Report:

Below is an overview of all open positions, as well as a performance report on all positions that were closed only since the previous day’s newsletter. Net P/L figures are based on the $50,000 Wagner Daily model account size. Changes to open positions since the previous report are listed in red text below. Please review the Wagner Daily Subscriber Guide for important, automatic rules on trigger and stop prices.

    position summary

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  • No changes to our open positions above.
  • Reminder to subscribers – Intraday Trade Alerts to your e-mail and/or mobile phone are normally only sent to indicate a CHANGE to the pre-market plan that is detailed in each morning’s Wagner Daily. We sometimes send a courtesy alert just to confirm action that was already detailed in the pre-market newsletter, but this is not always the case. If no alert is received to the contrary, one should always assume we’re honoring all stops and trigger prices listed in each morning’s Wagner Daily. But whenever CHANGES to the pre-market stops or trigger prices are necessary, alerts are sent on an AS-NEEDED basis. Just a reminder of the purpose of Intraday Trade Alerts.
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      Edited by Deron Wagner,
      MTG Founder and
      Head Trader