In this market, these 3 ETFs are moving

The major indices remained stuck in
their choppy and irresolute trading ranges for
another day, as Wednesday’s uneventful session was nearly a clone of the
previous day’s. After trading sideways for the first two hours, stocks began to
sell off at mid-day and trended lower until buyers stepped in during the final
two hours. The broad market indices briefly recovered into positive territory,
but the bears once again took control during the last hour of the session and
caused the major indices to finish near unchanged levels. The Nasdaq Composite
(
COMP |
Quote |
Chart |
News |
PowerRating)
lost less than 0.1%, but the Dow Jones Industrial Average
(
DJX |
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PowerRating) advanced
0.2%. The S&P 500 continued its balancing act and eked out a 0.1% gain.
Interestingly, the S&P has closed higher in each of the past four sessions, but
each day’s change has been a fractional advance of less than or equal to 0.1%.
Small and midcap stocks showed the most relative weakness, as the Russell 2000
Index
(
RUT |
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Chart |
News |
PowerRating) lost 0.5% and the S&P 400 dropped 0.2%. Each of the major
indices again closed near the middle of their intraday ranges, confirming the
recent indecision and lack of direction.

Turnover was marginally higher across the board yesterday.
Total volume in the NYSE increased by 3%, while volume in the Nasdaq was 6%
higher than the previous day’s level. Because the S&P 500
(
SPX |
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PowerRating) closed
higher and the Nasdaq closed lower, we could technically say that the S&P had an
“accumulation day” and the Nasdaq had a “distribution day.” However, each of the
broad market indices showed a complete lack of direction and closed near the
flat line. Therefore, not much should be read into yesterday’s slight uptick in
volume. Mixed market internals also complicated the analysis of yesterday’s
volume.

In yesterday’s Wagner Daily, we discussed how the
recent indecision in the S&P 500 caused the index to form three consecutive “doji
star” candlestick formations on its daily chart. Yesterday’s intraday volatility
and closing price near the opening price caused yet another “doji” to form:

If you study the historical chart of the S&P, or any of the
major indices, you will see it is highly unusual for the index to have more than
two “dojis” in a row. Equilibrium of supply and demand is usually resolved
quickly, at least in the short-term. However, the longer that a period of
indecision continues, the greater the move will be when it eventually comes.
Therefore, it has become extremely important that you are prepared to quickly
close any positions that are on the wrong side of the market when the move
eventually comes. The overhead resistance of the 20 and 50-day MAs, combined
with last week’s “distribution days,” means the likely direction of the next
move will be lower, but be prepared either way. It is also the end of the third
quarter and institutional “window dressing” by mutual and hedge funds can also
cause some erratic moves in stocks that may fool you as well.

Unfortunately, this week’s lack of direction in the broad
market and many industry sectors does not provide us with much fresh commentary
and technical analysis to write about. So, let’s take a quick look at each of
our open ETF positions instead. Doing so will enable you to have a clear plan on
how you may wish to manage those positions regardless of which direction they
move. Of the three open positions, the most promising is GLD (Gold Trust), which
is currently showing an unrealized gain of about 5% since our first entry point
on September 7:

As you can see,
(
GLD |
Quote |
Chart |
News |
PowerRating) resumed its uptrend yesterday after
the previous day’s shakeout below the uptrend line. It closed only 26 cents
below its all-time high and will probably test that level today. As regular
subscribers know, we sold 25% of the position near the highs on September 22,
but we are still long the remaining shares and will continue to trail a stop
below support of the uptrend line illustrated above. Overall, GLD looks great!

We also remain short
(
IYR |
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Chart |
News |
PowerRating) from our September 13 entry and
it is also showing an unrealized gain of 5%. As the chart below illustrates, IYR
has been consolidating near its lows for the past four days, which means it is
likely it will fall to new lows. The dotted horizontal line on the chart below
illustrates the support level we are anticipating IYR will fall below. Our stop
is now just above the highs of the sideways range:

Of the three open positions, the
(
MDY |
Quote |
Chart |
News |
PowerRating) short is the one
that is showing the most indecision. Our expectation is that the recent bounce
will result in a “lower high” being formed, which will cause MDY to drop back
down and set new lows. However, like the S&P, its recent action has been quite
indecisive. The trade is only 0.4% against us right now, so we are sticking to
our original stop above convergence of the 20 and 50-day moving averages.
Midcaps have been showing more relative weakness than the S&P, Dow, and Nasdaq,
so we are in good shape if the broad market begins to fall. A break below
the lows of the past two days should trigger a breakdown to a new low for the
month:

 

Open ETF positions: