Here are new setups for BBH and GLD

Stocks closed lower across the board
Tuesday, but this time the major indices held on to most of their prior day’s
gains. The broad market trended lower
throughout most of the session, but a rally during the final ninety minutes of
trading enabled the major indices to close at only a fraction of their worst
intraday losses. The Dow Jones Industrial Average lost 0.1%, the S&P 500 0.2%,
and the Nasdaq Composite
(
COMP |
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PowerRating) 0.3%. The smallcap Russell 2000
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fell 0.6% and the Midcap S&P 400
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PowerRating) dropped 0.2%. Overall, yesterday’s
retracement was minor considering the degree of the previous day’s gains. For a
change, it was refreshing to see the broad market not trade in the completely
opposite direction of the prior day’s trend.

One negative of yesterday’s session is that volume rose in
both exchanges. Total volume in the NYSE was 5% higher than the previous day’s
level, while volume in the Nasdaq increased by 2%. Tuesday’s losses, combined
with the increase in volume, made yesterday a bearish “distribution day” for
both the S&P and Nasdaq. It was the first distribution day since last
Wednesday’s bullish follow-through day. Since that day, the S&P 500 has had two
up days and two down days, but neither of the up days were on higher volume. One
of the two down days was on higher volume. This pattern tells us that
institutions have not been rushing back into the market since the October 19
“accumulation day.”

In yesterday’s Wagner Daily, we illustrated a chart of
(
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PowerRating) (Biotech HOLDR), which we felt was poised to breakout to the upside.
Bucking the trend of the broad market yesterday, it did just that. Although the
Nasdaq lost 0.3%, BBH rallied 1.2% and closed back above its 50-day moving
average for the first time since September 22. The daily downtrend line that
began with the mid-September high should now act as the new support on any
pullback. If you bought BBH yesterday, keep an eye on its next major resistance
level of the prior intraday high from October 4. Consider selling partial share
size into strength or at least tightening your stop if BBH makes a run for that
resistance level just over $196. We have circled this resistance level on the
chart of BBH below:

Another sector ETF that caught our attention yesterday was
(
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PowerRating),
which tracks the price of the spot gold commodity. As monthly subscribers will
recall, Morpheus recently netted a large profit in GLD by catching the September
breakout and trailing a stop into mid-October. GLD hit our trailing stop on
October 12 when it began its short-term price correction. However, the
correction seems to have been short-lived, as GLD has already recovered and may
once again be poised to set new highs in the coming week. Specifically, we like
that GLD has rallied back above its hourly downtrend line from the October 11
high. When the weekly and daily charts both show strong uptrends, you can use
the hourly chart to determine when to re-enter strong stocks that have had
short-term corrections. Looking at the hourly chart of GLD below, notice how it
gapped up and held above its hourly downtrend line yesterday:

The daily chart shows that GLD is sitting above its 20 and
50-day moving averages and, unlike most industry sectors right now, is well
above its 200-day moving average. GLD is also less than 1% away from its prior
52-week high, which also correlates to a 17-year high in the price of spot gold.
Because the daily and weekly charts show no major overhead resistance and the
hourly chart shows a break of the short-term downtrend, we feel now is the time
to re-enter GLD on the long side in anticipation of new highs. Notice the lack
of overhead supply on the daily chart of GLD below:

BBH and GLD are two of the best looking ETFs we see right now
because they track specific industry sectors as opposed to broad-based indices.
As you know, the S&P, Dow, and Nasdaq have been extremely indecisive over the
past week and are likely to remain that way until earnings season has concluded.
But if you focus on trading specific industry sectors instead of the broad
market, you can decrease your risk because a strong sector will usually trade
independently of the broad market. This is why both BBH and GLD rallied more
than 1% yesterday while each of the major indices closed lower.

Open ETF positions: