Commentary:
For the second consecutive day, the major indices gapped down to begin the session, but fought back to pare a significant portion of the intraday losses, only to dwindle into the close. Indecision was evident as all five indices closed near the middle of their respective trading rages on Tuesday. The Nasdaq led the drop, as it shed 1.1% for the day. The small-cap Russell 2000 was down 0.7%, while the S&P 500 and the S&P MidCap 400 both fell 0.6%. The Dow Jones Industrial Average demonstrated the most relative strength on Tuesday, but still closed down by 0.4%. All eyes are likely on the DJIA and the S&P 500 as both remain precariously perched at critical support levels.
Volume was up sharply on Tuesday. Turnover on the NYSE spiked 34% day over day. Nasdaq volume was also impressive, as it finished up over 18% in yesterday’s action. For the second straight day, declining volume overshadowed advancing volume on both indices. However, the spread was somewhat wider yesterday. Down volume exceeded up volume by a ratio of 1.8 to 1 on the NYSE and 3 to 1 on the Nasdaq. Although leadership has not abandoned the market, yesterday did show pockets of distribution.
There are signs that emerging market ETFs may be losing some of their luster. On Tuesday, several of these ETFs lost support and many others are testing support. Head and shoulders reversal-like patterns are abundant in the emerging market landscape. While scanning for potential ETF plays last evening, over thirty such setups were found. The PowerShares DWA Emerging Markets Technical Leaders ETF (PIE), provides an excellent example. Over the past four days, this ETF has been consolidating below the 50-day MA. A break below the eight week low of $17.45 provides a potential shorting opportunity for PIE. PIE is also of interest since it “includes approximately 100 companies that possess relative strength characteristics, and are domiciled in emerging market countries, including, but not limited to, Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey”. See Invesco Company website (https://invescopowershares.com) for further details. This ETF may be a good leading indicator as it provides key information on the status of market leaders. Typically, waning leadership foreshadows a downturn and vice versa.
The Market Vectors Indonesia ETF (IDX) presents an example of an emerging market ETF that has already broken down on the daily chart.
However, before deciding that strong ETFs are ready to implode, it is always wise to look at the weekly timeframe for further perspective (see below). The conclusion.it takes a volume enabled, powerful move to reverse a trend. A comparison of the daily and weekly charts of PIE and IDX lend quality information that might help explain why the markets have been choppy over the past two weeks. However, before deciding that strong ETFs are ready to implode, it is always wise to look at the weekly timeframe for further perspective (see below). The conclusion.it takes a volume enabled, powerful move to reverse a trend. A comparison of the daily and weekly charts of PIE and IDX lend quality information that might help explain why the markets have been choppy over the past two weeks.
The ProShares Ultra Short Emerging Markets ETF (EEV) provides a possible long entry above the November 29th high of $37.21. We are placing it on the watchlist. EEV has consolidated above the 50-day MA for the past four trading sessions. On November 29th it failed to break out on strong volume and ended up closing near the lows of the session. Yesterday, in whippy trading this ETF gapped up and managed to close near the highs of the day. Trade details are provided in the watchlist segment of the newsletter.
The SPDR Oil & Gas Exploration ETF (XOP) has maintained excellent relative strength to the market. A rally above the 4 day high of $48.64 makes XOP a potentially ideal long candidate. This ETF is also being placed on the watchlist.
We are inclined to place both long and short (inversely correlated) trades on the watchlist since the market is at an important inflection point.
Today’s Watchlist:
EEV
Long
Shares = 300
Trigger = 37.33
Stop = 34.88 Target = 42.25
Dividend Date = n/a
Notes = see commentary above
XOP
Long
Shares = 350
Trigger = 48.77
Stop = 47.34
Target = New 52-week high (will trail stop)
Dividend Date = n/a
Notes = see commentary above
EPU
Long
Shares = 400
Trigger = 48.84
Stop = 47.19
Target = New highs (will trail stop)
Dividend Date = n/a
Notes = see commentary in November 30 issue
PHO
Long
Shares = 700
Trigger = 18.20
Stop = 17.43
Target = New 52-week high (will trail stop)
Dividend Date = n/a
Notes = see commentary in November 29 issue
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
Note adjusted stop price in EPU setup.
- 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.
- For those of you whose ISPs occasionally deliver your e-mail with a delay, make sure you’re signed up to receive our free text message alerts sent to your mobile phone. This provides a great way to have redundancy on all Intraday Trade Alerts. Send your request to [email protected] if not already set up for this value-added feature we provide to subscribers.
Having trouble seeing the position summary graphic above?
Click here to view it directly on your Internet browser instead.
Notes:
Edited by Deron Wagner,
MTG Founder and
Head Trader