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Morpheus TradingMajor Market and ETF Trading |
An Uneventful 'Inside Day'
Stocks spent the first half of the day moving in a tight, sideways range, until a mid-day selloff pushed the major indices into negative territory. Modest buying interest in the final ninety minutes of trading enabled most of the main stock marked indexes to close slightly higher. The S&P 500, the only index to close lower, dipped less than 0.1%. The Nasdaq Composite and Dow Jones Industrial Average edged higher by 0.1% and 0.3% respectively. The small-cap Russell 2000 gained 0.2%, while the S&P Midcap 400 advanced 0.5%. Each of the major indices finished in the upper third of their intraday ranges, but off their best levels of the session.
Although most of the broad market indexes closed higher, they again did so on lighter volume. In NYSE, total volume declined approximately 38% below the previous day's levels. Total volume in the Nasdaq was 31% lower. It was the second straight day of lower volume gains across the board. Turnover also came in below average levels this time. Until the exchanges begin to register higher volume gains ("accumulation days"), one of the main technical signals to start buying stocks again is lacking. When markets climb higher, but on declining volume, it only takes one day of institutional selling to erase many days of gains. We remain on alert for the first signs of institutional accumulation that could lead to low-risk buying opportunities.
In the Nasdaq Composite, yesterday was an "inside day." This means that the intraday trading range of the index was contained completely within the previous day's range. The S&P 500 and Dow Industrials nearly had "inside days" as well, but they technically didn't because they probed marginally above the prior day's highs before closing below them. The "inside day" in the Nasdaq is circled on the daily chart of the index below:
Yesterday's "inside day" in the Nasdaq and near formation of the same in the other main indexes was uneventful on a technical level. The same resistance levels that we illustrated in yesterday's commentary remain valid today. You may wish to review those levels and set alerts on your trading platform.
On a short-term basis, a drop below yesterday's lows could trigger subsequent downward momentum that could rapidly send the major indices back down to their August 16 intraday lows. If the major indices begin breaking yesterday's lows, it may signal the end of the bounce off the lows. Such a breakdown would also signal us to initiate new short positions, especially if volume picked up on the downside move. But until that happens, we remain flat because stocks could bounce further before the bears attempt to resume control. Overall, it feels as though the market is looking for a reason to continue higher in the short-term, but not finding one. Have traders and investors already forgotten about last Friday's interest rate cut or did it simply not make a difference in the intermediate-term?
Open ETF positions:
Long - (none)
Short - (none)
NOTE: Regular subscribers to The Wagner Daily receive daily updates on the open positions above, as well as new ETF trade setups, including trigger, stop, and target prices. Intraday e-mail alerts are also sent on as-needed basis.
Deron Wagner is the head trader of Morpheus Capital Hedge Fund and founder of Morpheus Trading Group (morpheustrading.com), which he launched in 2001. Wagner appears on his best-selling video, Sector Trading Strategies (Marketplace Books, June 2002), and is 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. He is also a frequent guest speaker at various trading and financial conferences around the world. Wagner is currently working on this third book, scheduled for publication in early 2008.
For a free trial to the full version of The Wagner Daily above, which includes detailed ETF trade setups and daily position updates, or to learn about our other newsletters, visit morpheustrading.com or send an e-mail to deron@morpheustrading.com .
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