Although the spot gold and silver commodity ETFs continue trading below their 50-day moving averages after a recent pullback from their highs, it is interesting to note that clear relative strength is being observed in the actual gold and silver mining ETFs. Yesterday, for example, Global X Silver Miners ($SIL) jumped 3.2% higher. Similar action was observed in gold mining ETFs, such as Market Vectors Gold Trust ($GDX), which cruised 3.1% higher. We have been long SIL in our model ETF trading portfolio since October 22, and the ETF is now breaking out above a tight, multi-week base of consolidation. Volume also surged to nearly 4 times its average level yesterday, confirming the breakout attempt above the consolidation:



Emerging markets ETFs that we have been discussing in recent days put in a very mixed performance yesterday. One former market-leading international ETF, Global X Greece ($GREK), plunged a whopping 10.7% yesterday. On the other hand, iShares Philippines Index ($EPHE) showed considerable relative strength by managing to gain 1.3% and closing just shy of its 52-week high. Still, the sudden tumble in market-leading GREK is a good example of why our market timing system remains in "sell" mode, causing us to thereby focus on trading ETFs on the short side of the market.

Although the market indeed feels very weak, it will eventually bounce substantially. When it does, there will be a plethora of technical resistance levels waiting to greet any rally attempt. When that occurs, we will be prepared to take advantage of selling short the weakest ETFs (or buying inversely correlated "short ETFs"). There are already several ETFs we are internally stalking for short entry on a significant market bounce. But the beauty of ETF trading is that we can still seek opportunities on the long side of the market to have a very low correlation to the direction of the main stock market indexes. That includes currency, commodity, or fixed income ETFs.

Yesterday, our long setup in Direxion 30-year Treasury Bond ETF ($TMF) triggered for buy entry, as the ETF rallied to close above its 50-day moving average. As illustrated in the October 29 issue of The Wagner Daily, we are anticipating a resumption of the dominant, long-term uptrend of TMF, now that the intermediate-term correction may be ending. As shown on the daily chart below, we are off to a good start with TMF:

 

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.