Although we have a buy signal in place, we are now at resistance of the 50-day MA on all of the major indices. This would suggest that we may see either a pullback from or consolidation at the current levels over the next several sessions. Now that we are at a key resistance level in the broad market, a brief review of the Nasdaq and the S&P 500 are in order.

The S&P Select Consumer Staples SPDR ETF (XLP) has been one of the strongest ETFs in the market over the past two months. Last Thursday, on a burst of volume, XLP unsuccessfully attempted to break out of its three month trading range. Nonetheless, this ETF is now poised to see a new 52-week high and could provide a buying opportunity either on a pullback or on a volume fueled move above the three day high ($34.65). Because obvious breakouts above recent swing highs often fail, ideally we would like to see XLP pull back and form a reversal candle near its 20-day and 50-day moving averages. The high of the reversal candle would then serve as the buy pivot for a possible long entry. We will be monitoring XLP closely as a potential long candidate.

Over the past two weeks, the iShares Dow Jones Select Dividend Index (DVY) has shown relative strength, as it has been one of the few ETFs to regain support of both its 20-day EMA and 50-day MA. DVY could offer a buying opportunity if it continues to consolidate above these key marks. Ideally, we would like to see DVY form a higher low and form a reversal candle as a possible pivot point for a potential long entry. The chart below provides a visual of the hypothetical price action that we view as ideal for a possible long entry. We will continue to monitor DVY closely for a potential long entry.

Yesterday, on a burst of volume, the iShares Nasdaq Biotechnology ETF (IBB) undercut its 20-day EMA but reversed to close near session highs. A move above the three day high of $123.94 could provide a buy entry trigger in this ETF. We are placing IBB on the watchlist. Trade details are available to our subscribers in the watchlist section of the newsletter.

As we’ve stated many times in the newsletter, “each trade stands of its own merits.” With this in mind, we are placing the ProShares UltraShort Oil and Gas ETF (DUG) back on the watchlist. DUG formed a bullish reversal candle yesterday, as it undercut its 20-day MA but then rallied to close near session highs. Also, DUG formed the reversal candle on an uptick in volume. A move above the June 8th high of $26.87 could provide a buy entry trigger for this inverse ETF. Trade details are posted in the watchlist segment of the newsletter.

For five days now, the broad market has ping-ponged back and forth in a tight range. A quick review of the major averages should help to shed some light on the current state of affairs in the market.

Yesterday, the Direxion Daily Technology Bear 3x Shares ETF (TYP) formed a bullish engulfing candle on burst in volume. An engulfing candle is formed when the present day’s price action completely “engulfs” the previous day’s candlestick. A move above yesterday’s high of $11.68 could present a buying opportunity in this inverse ETF. We are placing TYP on the watchlist. Trade details are posted in the watchlist section of the newsletter.

During the recent market correction, XLP has shown relative strength to the broad market. Unlike most ETFs, XLP never came close to testing its 200-day MA. Further, as of Friday, XLP reclaimed support of both its 20-day and 50-day moving averages. XLP could present a buying opportunity on a test of, and pullback from, resistance near its most recent swing high of $34.50. Following a pullback from this level, we would look for XLP to form a lower high and a higher low. The lower high could potentially serve as a buy entry trigger, and the higher low could serve as a stop for the potential entry. It is too early to consider XLP as an official setup. However, since our market timing model could soon provide a buy signal, we must be prepared to seize opportunities on the long side of the market.

Over the past four days, we have been tracking the ProShares UltraShort Oil and Gas ETF (DUG) for a possible long entry on pullback into the 20-day and 200-day moving averages. Yesterday, DUG formed the reversal candle we were looking for, as a possible pivot for a buy entry. As a result, we are placing DUG on the watchlist. Trade details are available to our subscribers in the watchlist segment of the newsletter.

In the June 5th edition of The Wagner Daily, we stated that, “…the ProShares UltraShort Oil and Gas ETF (DUG) formed a distinct bearish reversal candle and could offer a buying opportunity on a pullback into support near its 10-day and 20-day moving averages. On a pullback buy entry, we look for an ETF to undercut a key moving average or support level, and form a reversal candle. The reversal candle then serves as the pivot for a possible trade entry. In this example, the potential long entry would occur on a move above the reversal candle (See June 5th chart below).” Yesterday, on high volume, DUG sold off sharply and closed just above its 20-day. If DUG can undercut its 20-day EMA and form a reversal candle (See second chart of DUG below), it could offer a possible buy entry above the high of that reversal bar.