Crude Oil ETF Testing Its All-time High

NOTE: Please click on the charts below to enlarge them if they do not appear clearly.

Stocks closed moderately lower across the board yesterday, but the major indices held within support of their recent trading ranges. The Dow Jones Industrial Average slipped 0.3%, the S&P 500 0.5%, and the Nasdaq Composite 0.7%. Both the small-cap Russell 2000 and S&P Midcap 400 indices gave up just 0.1%.  All the losses were the result of a broad-based opening gap down, as stocks subsequently meandered in a tight, sideways range throughout the entire day before closing near the middle of their intraday ranges.

Turnover in both exchanges declined modestly.  Total volume in the NYSE was 6% lower than the previous day's level, while volume in the Nasdaq similarly eased by 5%.  In both the NYSE and Nasdaq, it was the single lowest volume day of the year.  This is positive, as it shows that mutual funds, hedge funds, and other institutional players were not behind yesterday's selling.  Instead, they simply remained on the sidelines, waiting to join the buy side on the stock market's next "up" day.  The Nasdaq is a perfect example of a bullish price to volume relationship.  Turnover spiked higher when the index broke out on April 1, but has declined in each of the past five days the index has consolidated near that day's high.  To continue this bullish pattern, trading activity should significantly increase when the broad market eventually scores its next solid day of gains.

The crude oil commodity has rallied back to test its all-time high from mid-March.  If oil is able to move above resistance of its record high, another intermediate-term uptrend could follow.  One of the easiest and best ways to play a bullish move in the price of crude oil is through the U.S. Oil Fund (USO), which roughly mirrors the price movement of crude oil.  The test of the prior high from mid-March is shown on the daily chart of USO below:

On a technical level, nothing really changed yesterday. ETFs we've pointed out as bullish setups over the past few days ticked a bit lower, but remained within support of their recent trading ranges. The same could be said of the major indices, each of which have refused to give up more than a small portion of their April 1 gains thus far.  In yesterday's commentary, we said of the stock market's tight, sideways range, "While this consolidation is indeed bullish, stocks must now prove they are capable of following through on the breakout above key resistance levels that occurred last week."  Sooner or later, the bulls will make a valiant effort to push stocks to new near-term highs.  When that day comes, the price and volume action will tell us more about the true momentum in the market.  Until that happens, we remain lightly positioned on the long side, ready to buy more stocks and ETFs when the market tells us to do so.

Open ETF positions:


Long - IYT, INP

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 Trade Alerts are also sent via e-mail and/or mobile phone text message 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.

<< My Home | TheMoneyBlogs Home

• Finally, Some Trend Resolution!
• Basic Materials Setting Up For Another Leg Down
• Patience Paying Off
• Short-term Charts Choppy? Try The Weekly Charts.
• Waiting For The Real Direction Of The Market

• September 2008
• August 2008
• July 2008
• June 2008
• May 2008
• April 2008
• March 2008
• February 2008
• January 2008
• December 2007
• November 2007
• October 2007
• September 2007
• August 2007
• July 2007
• June 2007
• May 2007
• April 2007
• March 2007
• February 2007

• PowerRate Your Favorite Stock Today!
• Morpheus Trading

• Biiwii.com Notes
• In The Money
• Newmark's Door
• Millionaire Now! by Larry Nusbaum
• Ludwig von Mises Institute
• Business Opportunities

• Help John Mccain Count His Houses
• California Real Estate Licenses Decline Again
• Freddie Overstated Capital Cushion / Bailout Imminent
• Calling All Brokers & Agents: Meineke Franchise Open Houses
• Liquid Hot Magma
• Resourcefulness A Great Characteristic In A Franchise