The major indices posted their third straight day of gains yesterday, as another session of higher volume gains pointed to more institutions returning to the market. Stocks jumped higher out of the starting gate, then trended higher throughout the morning. The broad market gave back some of its gains in the afternoon, but the main stock market indexes still finished above the middle of their intraday ranges. The Nasdaq Composite ramped up 3.3%, the S&P 500 2.9%, and the Dow Jones Industrial Average 2.8%. Small and mid-cap stocks returned to their positions of leadership. The Russell 2000 motored 4.9% higher, as the S&P Midcap 400 gained 4.3%.

Total volume in the NYSE surged 25% higher, while volume in the Nasdaq similarly swelled 23%. The higher volume gains enabled the Nasdaq to score its third straight "accumulation day," a very positive sign for the market indeed. The S&P 500 has risen in faster trade in two of the past three sessions. This week's bullish volume patterns indicate mutual funds, hedge funds, and other institutional players are gradually re-acquiring an appetite for risk. Because institutions are responsible for more than half of the stock market's average daily volume, institutional buying interest is crucial in order for rallies to be sustainable.

Rallying to close above their March 26 highs, thereby setting new "swing highs," the S&P 500, Nasdaq Composite, and Dow Jones Industrials have technically entered back into short-term uptrends. More notably, both the Nasdaq Composite and Nasdaq 100 indices finished above their February 2009 highs, causing both indexes to enter into new intermediate-term uptrends. The S&P and Dow are still below their February highs, and may take a while until they manage to follow suit, but it's positive that the index with the most relative strength led the way by moving into a new intermediate-term uptrend yesterday. The intermediate-term trend change in the Nasdaq is shown below, on the daily chart of PowerShares QQQ Trust (QQQQ), an ETF proxy for the Nasdaq 100 Index:

With QQQQ entering into a new intermediate-term uptrend, it technically triggers a buy in the tech-heavy ETF. However, notice that QQQQ only closed above its February high by a few cents, not a wide enough margin to confirm the breakout. Therefore, if buying QQQQ at current levels, be sure to keep a tight stop to protects against a failed breakout. Alternatively, wait for more confirmation before buying, such as ensuring QQQQ holds above that new $31.68 support level for the first thirty minutes of today's trading.

As the overall market continues to act better, more ETFs are gradually coming onto our radar as solid buy candidates. Because the pullback in financials was very short-lived, the bullish consolidation in the banking sector is hinting at another leg higher in the near-term. If that happens, Regional Bank HOLDR (RKH) should break out above a key area of horizontal price resistance. This is shown on the daily chart below:

Because all the HOLDRS ETFs trade only in increments of 100 shares, subscribers with small accounts could alternatively consider SPDR Regional Banking (KRE) or S&P Financial SPDR (XLF). However, RKH has a slightly better chart pattern, and has been showing a bit more relative strength than KRE or XLF.

Within the realm of International ETFs, several Emerging Markets ETFs are now breaking out above key resistance levels. This list includes: iShares Brazil (EWZ), iShares Emerging Markets (EEM), iShares Xinhua China 25 (FXI), and iPath India Index (INP). Below is a daily chart of EWZ, which just broke out above a major area of horizontal price resistance yesterday:

In addition to the ETFs mentioned above, iShares Medical Devices (IHI), which is now testing resistance of its "swing high," remains on our watchlist. The Energy ETFs we discussed in yesterday's newsletter all raced higher yesterday, benefiting our open positions in Direxion Energy Bull 3x (ERX), U.S. Oil Fund (USO), and U.S. Gasoline Fund (UGA). We anticipate further strength in energy shares, so we'll keep our stops a bit loose for now. Claymore Global Solar Energy (TAN) tested the high of its short-term consolidation yesterday, and could garner a lot of upside momentum if it clears the $8 area. Internet HOLDR (HHH), which we bought on March 23, finished at its highest closing price since last October.

Open positions (coming into today):


ERX long (150 shares from April 1 entry) - bought 24.52, stop 20.40, target 39.90, unrealized points = + 2.21, unrealized P/L = + $332

USO long (150 shares from March 17 entry) - bought 29.08, stop 27.66, target 38.70, unrealized points = + 1.90, unrealized P/L = + $285

HHH long (200 shares from March 23 entry) - bought 35.25, stop 32.49, target 41.80, unrealized points = + 1.22, unrealized P/L = + $244

UGA long (175 shares from March 4 entry) - bought 23.41, stop 22.61, target 31.30, unrealized points = + 1.37, unrealized P/L = + $240

TAN long (500 shares from March 31 entry) - bought 7.05, stop 5.88, target 9.75, unrealized points = + 0.27, unrealized P/L = + $135

UDN long (700 shares from March 25 entry) - bought 25.70, stop 24.84, target 27.45, unrealized points = (0.21), unrealized P/L = ($147)

SLV long (400 shares from March 5 entry) - bought 13.14, stop 12.25, target 16.35, unrealized points = (0.37), unrealized P/L = ($148)


Closed positions (since last report):


(none)


Current equity exposure ($100,000 max. buying power):


$46,899

Notes:


• Stops have been raised in USO and UGA, thereby reducing our risk exposure in those positions. New stops are just below their "swing lows" and 50-day MAs. No other changes to our existing positions, most of which are starting to see some upward momentum.
  
  
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