The Nasdaq Composite joined the Nasdaq 100, with a clear breakout to new highs on higher volume Tuesday. As mentioned in yesterday's report, tech stocks continue to lead the market higher. Small cap stocks joined in as well, with the Russell 2000 now well above the 50-day MA. The Dow Jones is the only index yet to extend much beyond the 50-day MA.

The relatively weak financial sector will need to get going for the S&P 500 to catch up to the Nasdaq. Currently, big cap financial stocks such as $BAC, $JPM, and $WFC are holding up. But $GS and $C are trying to recover from an ugly selloff in January.

iShares Transportation ETF ($IYT) failed to hold above the 50-day MA on Tuesday, and may need to test the prior swing low before it can head significantly higher.

Silver mining stocks exploded higher last week on big volume. We must now wait for a bullish consolidation to develop in the silver mining ETF ($SIL) once the current momentum fades.

We have one new setup on today's Wagner Daily watchlist and it is on the short side. Emerging markets have been relatively weak for quite some time, with iShares Brazil ($EWZ) being one of the weakest in the sector. The weekly chart below shows $EWZ breaking down to new 52-week lows and bouncing into resistance.



To make it easier for all subscribers to participate on the short side, we will be buying the Ultrashort Brazil ETF ($BZQ), which allows us to short by going long an inverted ETF. On the daily chart below, $BZQ has held the 20-day EMA with a slight undercut last week. Trade details can be found in the watchlist section above.



We will be monitoring the action in $EWZ for a target on the short side. The monthly chart shows several months of support around $30, which is where we plan to take profits off the table (if the setup triggers).

 

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.