A strong rally in the final hour of trading saw broad market indices close at the highs of the session, led by the relative strength in financials. After fighting off a weak open, markets reversed higher but failed an early afternoon breakout attempt and fell back into a range. Tech stocks failed to confirm the strength in the market, as the Nasdaq 100 was a significant laggard all day long. Around 2:30 pm, the Nasdaq 100 set new intraday lows but the S&P 500 was able to hold its ground. As mentioned above, it was the last hour of trading and the relative strength in financials that put a hurting on the early shorts into the close. The S&P 500 and Dow Jones Industrials both closed at a new high for the day, up 1.3% and 1.4% respectively. The small-cap Russell 2000 gained 1.8%, and S&P Midcap 400 added 1.4%. The late surge turned into quite a reversal for Nasdaq Composite, which rallied from the lows of the day to close at the highs in positive territory, up 0.7%.

Total volume fell off Tuesday's pace in both the NYSE and Nasdaq by less than 2%, though NYSE volume was very strong into the close. Market internals were quiet, with advancing volume topping declining volume by a 1.6 to 1 margin on the NYSE. Declining volume beat advancing volume on the Nasdaq by a 1.4 to 1 margin. The positive to take away from yesterday's session was the resiliency of the market to fight off some afternoon selling and avoid the potential of another day of distribution.

Market technicians have always looked to the financials to confirm a new bull market rally. Overall, we see the recent breakaway gap up in financial ETF's IYG and RKH as a strong positive for the current rally. Below is a chart of the iShares DJ US Financial Index (IYG):

The comparison chart below highlights the intraday relative strength in the HOLDRS Regional Banking ETF (RKH) against broad market indices yesterday:

Building the case for a bullish breakout in energy sector, we see a few charts that are poised to break the downtrend line after basing out at the lows for the past few months. The Wagner Daily is already long OIH, but XLE, IEO, and XOP are looking good as well. Listed below are XLE and IEO:

Keeping an eye on commodities, the PowerShares DB Agriculture Fund ETF (DBA) has formed a tight range of consolidation above the 50-day MA, and may break the downtrend line this week or next. DBA tracks the performance of Corn, Soybeans, Sugar, and Wheat, with an equal 25% weighting in each component.

With the S&P 500 basically range bound over the past three sessions, nothing has changed in terms of our short-term outlook from yesterday's report. We would welcome some sort of retracement in the market to provide quality pullback opportunities, as long as the volume pattern remained bullish (little to no distribution). We still have our eye on the 789 area in the S&P 500 as a key level of price support should the market correct by price rather than time. Either way, the point is to be on guard for further selling in the near-term. The intermediate-term outlook, however, still looks bullish. We'll be closely watching for ideal pullback entries in strong ETFs in the coming weeks.

Open positions (coming into today):


TAN long (500 shares from March 31 entry) - bought 7.05, stop 7.47, target 9.75, unrealized points = + 01.05, unrealized P/L = + $520

UGA long (175 shares from March 4 entry) - bought 23.41, stop 23.17, target 31.30, unrealized points = + 1.31, unrealized P/L = + $228

OIH long (100 shares from April 14 entry) - bought 83.85, stop 77.80, target 102.40, unrealized points = + 1.14, unrealized P/L = + $113

UDN long (700 shares from March 25 entry) - bought 25.70, stop 24.84, target 27.45, unrealized points = (0.31), unrealized P/L = ($224)

SLV long (400 shares from March 5 entry) - bought 13.14, stop 11.71, target 16.35, unrealized points = (0.60), unrealized P/L = ($240)


Closed positions (since last report):


USO long (150 shares from March 17 entry) - bought 29.08, sold 28.92, points = (0.16), net P/L = ($26)


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


$39,668

Notes:


• USO triggered our stop for a small loss.
  
  
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