This sector has been correcting but may be worthy of buying

In keeping with the stock market’s
indeterminate nature of late
, the major indices chopped around within
their respective ranges of the previous day before finishing mixed across the
board. Small and mid-caps outperformed, as the Russell 2000
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gained
0.4% and the S&P 400 advanced 0.1%. The Dow Jones Industrial Average
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fell 0.4%, the S&P 500
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dropped 0.3%, and the Nasdaq Composite
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lost only 0.1%. As is typical in choppy sessions, both the S&P and Nasdaq
Composite closed in the middle of their intraday ranges.

Like the previous day, turnover in both the NYSE and Nasdaq
declined. Total volume in the NYSE was 1% lighter than the previous day’s level,
while volume in the Nasdaq was 7% lighter. Because the major indices were mixed
and the volume changes were minimal, not much should be read into the impact of
yesterday’s volume levels. Declining volume marginally exceeded advancing volume
in both exchanges, but internals were mostly mixed throughout the session.

One sector that may be worthy of buying in the near future is
Gold
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. The Gold Index, which has been in a primary long-term uptrend
since May of 2005, has been correcting on its shorter-term daily chart since the
beginning of February 2006. However, it closed yesterday right at resistance of
its downtrend line and may be poised for a breakout over the next several days:



Obviously, a breakout in the $GOX would provide buying
opportunities in a handful of individual gold mining stocks. But it is important
to realize that GLD (streetTRACKS Gold Trust) and the commodity price of spot
gold does not always lead the prices of the mining stocks. Therefore, you
probably should consider making your own “synthetic ETF” by simultaneously
trading a basket of the leading gold stocks. If spot gold begins to form a
similar chart pattern, you can simply buy GLD, but trading individual mining
stocks until then is a better bet. There are numerous stocks within the sector,
but a few of the stronger ones right now include GG, MDG, GLG, and PD.

We don’t want to sound like a broken record, but the reality
is that there is nothing new to say about the technical state of the broad
market. The major indices continue to chop around in a range with the S&P just
above its breakout level of 1,295 from the February high. The Nasdaq Composite
remains in a “chop fest” just above support of its 20 and 50-day moving
averages. We will continue to watch for a confirmed break out of the range,
which will eventually present itself. When it does, being prepared with cash in
hand instead of already positioned with stocks is a much better way to tackle
the situation.


Open ETF positions:

Short IWM, IGW, and EWZ (regular subscribers to

The Wagner Daily

receive detailed stop and target prices on open positions and detailed setup
information on new ETF trade entry prices. Intraday e-mail alerts are also sent
as needed.)

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. For a free trial to the full version of
The Wagner Daily or to learn about Deron’s other services, visit

morpheustrading.com
or send an e-mail to

deron@morpheustrading.com
.