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At last month's New York Traders Expo, Morpheus Trading Group's Founder and Portfolio Manager, Deron Wagner, was interviewed regarding the usage of non-correlated ETFs in a bear market. Produced by MoneyShow.com, the live video interview can be viewed by clicking here. The video is just 2.5 minutes in length, so please take a look. If you missed last month's presentation at the New York Traders Expo, don't fret. We're pleased to announce that Wagner has been invited to speak at the upcoming Los Angeles Traders Expo from June 18 - 21, 2008. Click here for details of this and other upcoming events. We look forward to meeting you at our next event in California! |
Just as Tuesday's roaring session sent the bears running for cover, yesterday's sell-off kept the bulls on their toes. Stocks retraced sharply, causing the major indices to give back all their post-Fed gains. Both the S&P 500 and Dow Jones Industrial Average fell 2.4%, while the Nasdaq Composite and small-cap Russell 2000 suffered matching declines of 2.6%. The S&P Midcap 400 lost 2.5%. Completely opposite of the previous day's action, all the main stock market indexes finished at their dead lows of the day. As the bulls and bears battle it out, violent, whipsaw price action from day-to-day has become the norm.
Turnover was mixed. Total volume in the NYSE ticked 3% higher, as 4% less shares changed hands in the Nasdaq. It was the third consecutive day of less than average volume in the Nasdaq. In both exchanges, declining volume exceeded advancing volume by approximately 4 to 1. Considering Tuesday's incredibly positive 19 to 1 adv/dec volume ratio in the NYSE, yesterday's negative ratio of 4 to 1 on the pullback wasn't too bad.
In the March 18 issue of The Wagner Daily, we noted that commodity ETFs had possibly begun to enter a corrective phase. That day, we began stalking short setups in ETFs comprised of oil stocks, as they were generally looked weaker than the crude oil commodity itself. Along with practically every other sector, oil and oil stocks bounced with the broad market that day, but the sector subsequently moved sharply lower yesterday. The S&P Energy SPDR (XLE) has now confirmed the break of its intermediate-term uptrend line, as well as its 20, 50, and 200-day moving averages. With yesterday's close below its March 17 low, odds are good that XLE now moves lower to test its January/February lows in the near future. The confirmed break of support is shown on the daily chart of XLE below:
Upon noting yesterday's major relative weakness in the oil sector, we bought the inversely correlated UltraShort Oil and Gas ProShares (DUG) when it broke about above the previous day's high. We initially targeted it for entry on March 18, but it didn't trigger until yesterday. Not only did DUG break out above its 50-day MA and intermediate-term downtrend line yesterday, but it did so on much higher than average volume. This tells us that institutions were actively selling energy-related shares:
Although the 200-day MA of DUG is just overhead, we're not overly concerned about it. In this case, the 50-day MA has been acting as a more pivotal level of support and resistance, while the break of the intermediate-term downtrend line should generate enough momentum to zoom through the 200-MA. Even if DUG happens to run out of gas at its 200-MA, which we doubt, we can still close the trade for a nice gain because we bought it just over yesterday's high. Presently, the DUG position is showing an unrealized gain of just under 2 points. Conversely, our long position in the Ultra QQQ ProShares (QLD) is feeling some heat after yesterday's sell-off, but we're still hanging in there. Our original stop is still below the March 18 low.
Given the magnitude of Tuesday's gains, a minor pullback yesterday would not have been surprising. However, the S&P, Nasdaq, and Dow each retraced about 50% (or slightly more) of their gains from their March 17 lows to March 19 highs. As you may recall from our regular discussions on Fibonacci retracements, 50% pullbacks are still acceptable, but the rally attempt will be in major jeopardy if the stock market indexes retrace more than 61.8% of their ranges. Simply put, we remain cautiously bullish on the near-term direction of the broad market, just as long as yesterday's lows in the S&P, Nasdaq, and Dow are not violated by a significant amount. Closing prices firmly below yesterday's lows would immediately shift our near-term bias to neutral. Intermediate and long-term trends remain bearish.
If you wish to learn about Morpheus Trading Group's ETF trade entries on the same day they occur, sign up for a free trial to The Wagner Daily or other MTG services by clicking here (limit one per household). Also, remember that all previously published issues of both The Wagner Daily and The Wagner Weekly are available in the MTG archives. If you are new to our services or wish to broaden your knowledge of ETF trading or our general trading style, we recommend you browse the archives because it is educational and free! Click here to visit the Wagner Daily archives or here to visit the Wagner Weekly archives.
In this column, MTG presents you with a FREE, actual trade setup that we are stalking for entry at some point during the week. Note that, unlike the daily guidance that regular Stalk Sheet subscribers receive, this free Stalk of the Week does not take into account overall broad market conditions that can easily affect the trade over the next several days. This week's setup is:
Click to receive your free 1-month trial to The MTG Stalk Sheet so that you can receive an average of one to three trade ideas such as this one on a daily basis (limit one free trial per household). Subscribers are always provided with detailed entry, stop, and target prices for each trade, and intraday e-mail alerts are sent as needed.
By popular demand, Morpheus Trading Group is pleased to announce that all subscribers of The Wagner Daily, MTG Stalk Sheet, or ETF Trend Tracker can now receive all intraday e-mail alerts as SMS text messages directly to their mobile phones. This service is available to U.S. subscribers, as well as our clients around the globe. The best part is. . .this value-added service is being provided to all regular subscribers free-of-charge!
If you're not currently a subscriber, you may interested to know the performance of our ETF trades in The Wagner Daily has been quite strong during this bear market. After having compiled our February stats last week, we noticed the model account is on track for its most profitable quarter ever. The Wagner Daily is already showing a net gain of 21.7% in the first two months of the year! Conversely, the S&P 500 has already shed 13% year-to-date.
If you have never had a free trial to our services, or it's been at least one year since your last free trial received our services, you are again eligible to receive a free trial to any of our services. To sign up for a 30-day free trial, simply click on the URL below and select the free trial subscription option of your choice:
https://morpheustrading.com/index.aspx?page=services_signup_freetrialIf you've recently had a free trial and would like to become a monthly subscriber, click on the URL below and select the subscription and payment option of your choice:
https://morpheustrading.com/index.aspx?page=services_signupAfter you sign up for either a paid or trial subscription, please send an e-mail to support@morpheustrading.com, giving your complete phone number, including the country code if you are outside of the United States. We will confirm receipt of your request, and you should then begin receiving all intraday e-mail alerts via your mobile phone beginning Monday, March 10.
As always, we would like to thank our subscribers for their ongoing suggestions and enthusiasm. Providing free SMS text messaging is just one way to let subscribers know we do listen and care! Your business is appreciated, so please let us know if you ever have any questions or there is anything we can do for you. At MTG, client service is of utmost importance!
Below is the weekly commentary that accompanied the most recent ETF Trend Tracker, e-mailed to subscribers last weekend. The Morpheus ETF Trend Tracker, a perfect supplement to the ETF Roundup guide, is a comprehensive table of Exchange Traded Funds (ETFs) designed for informed investors and longer-term traders who prefer to hold their ETF positions for a few weeks to several months at a time. Based exclusively on a weekly analysis of trendlines on the daily and weekly charts, the ETF Trend Tracker provides subscribers with a thorough snapshot of the primary trend direction of ETFs in every category from broad-based to industry sector to international. This information is e-mailed to subscribers weekly, in a user-friendly format that groups ETFs based on the direction of their primary trends.
Commentary:NOTE: Because last week's Wagner Weekly was delivered later than usual, the commentary below is the same this week. . .
The indices began the week poorly, rallied, then ended the week near the middle of the range. During this time, a swing low was formed just above the January lows. The only exception to this pattern was the Nasdaq 100 (QQQQ). QQQQ hit new lows, but rallied well and broke above the descending trend channel. The stops are placed to lock in over 13% gain since the November 2007 entry into the “descending trend” list. The volatility indicates indecision and uncertainty. Unfortunately, an initiation of a trade or investment at this stage requires higher risks, which translate into wider stops to allow the range expansion of price.
We tightened several MTG Stops (S1) last week to address the volatility. Subscribers should review the updated ETF Trend Tracker report. Many industries have realized gains in the descending trend of over 10% and we are looking to tighten in the weeks ahead. The sectors are looking to digest and absorb the multitude of influences. Acting particularly weak are the Telecoms (IYZ), Pharmaceuticals (PPH), Financials (XLF), and Healthcare (XLV). Conversely, Commodities (DBC), Euro (FXE), Gold (GLD), Silver (SLV), Oil (USO), and Natural Gas (UNG) rallied with enthusiasm.
The Bond market rallied well with the Bellwether mid-term bonds (IEF) ending the week with another higher close. The Corporate bonds (LQD) remain lower and is near its 52-week low posted in August 2007. New on the horizon are managed bond ETFs. We will be looking into these and other fixed income bond related issues and may add new tickers to follow in the near future.
The Asian markets fell significantly to the developments last week. Hong Kong (EWH), Japan (EWJ), Korea (EWY), India (INP), and China (FXI) posted new lows. EWY has been in the descending trend since November 2007, and has gained over 22%. Japan (EWJ) is the newest to the descending trend.
Regular subscribers to the ETF Trend Tracker should contact us with additional questions and for a free phone consultation session. We can discuss with you about how to use the ETF Trend Tracker report and even work on successful trade strategies you can implement today; find out one proven strategy that we hold closely as professional traders in the ETF community. Whatever you like to talk about is up to you! It’s free for the asking if you are registered in the free 30-day trial or already a current subscriber to any of the MTG services. Just call or e-mail us and setup an appointment, and we will call you back. This is a limited time offer and we must limit the session to 30-minutes (other restrictions and limitations apply). Make gains in this difficult market now and secure a valuable one on one private consultation session with a professional at the Morpheus Trading Group, so don’t wait!
Click to receive your free 1-month trial to the ETF Trend Tracker (limit one free trial per household), which will be e-mailed to you every week, along with intra-week updates on an as-needed basis.