The main stock market indexes oscillated in a tight, sideways range throughout yesterday's session, as stocks digested their recent gains. Lazily drifting into the closing bell, the major indices finished with mixed results. The Nasdaq Composite continued to show relative strength by gaining 0.6%, as did the small-cap Russell 2000 Index. The Dow Jones Industrial Average slipped just 0.1%, while the broad-based S&P 500 ticked 0.2% higher. The S&P Midcap 400 advanced 1.0%. All the major indices closed in the upper third of their narrow intraday ranges.
Typical of bullish consolidation days, turnover eased across the board. Total volume in the NYSE decreased 8% below the previous day's level. The Nasdaq's volume was similarly 10% lighter. When the market trades sideways following a substantial rally, it's positive when it does so on lighter volume. This indicates that the bears did not sell into strength while the bulls took a rest. Conversely, higher volume during periods of consolidation is often indicative of bearish "churning." In order for the broad market's price to volume relationship to remain bullish, higher volume should accompany the next round of gains that follows the current consolidation.
Many ETFs have started to break out above resistance of multi-month downtrend lines, providing us with quick, counter-trend momentum trading opportunities. ETFs that were former market leaders may bounce the most in the short-term. This is because investors often put their money back into the ETFs they remember as being strong. For this reason, we bought the iPath India Index (INP) on Monday, after it broke out above its two-month downtrend line. It subsequently moved higher yesterday, and is back above resistance of its 20-day EMA. This is shown on the daily chart below:
On several occasions over the past two months, notice how the 20-day EMA (the beige line) acted perfectly as resistance that eventually pushed INP to new lows. Now that it has reclaimed its 20-day EMA, that level should now provide price support. Remember that a prior resistance level becomes the new support level after the resistance is broken. Regardless, we're only looking to capture a short-term bounce to the area of the 200-day MA. If INP rallies to the $75 to $76 area, we plan to sell into strength. This would enable us to lock in a gain of nearly 10 points with a holding period of just a week or so. There is simply too much overhead supply to expect a larger gain in the near-term. Presently, the position is showing an unrealized gain of 2.7 points.
In addition to Monday's purchase of INP, we bought the iShares DJ Transportation (IYT) yesterday morning. We sent an Intraday Trade Alert to subscribers, informing them of our entry, after it pulled back to near support of the prior day's breakout level. It held that support quite well, and moved back to the previous day's high later in the day. Over the next several days, we expect IYT to make another leg up. Our long position in the ProShares Ultra QQQ (QLD) also continued to build on its gains yesterday. We'll soon trail a tighter stop to protect the gain and maximize profit along the way. Our long position in the UltraShort Oil and Gas ProShares (DUG) is against us by just 32 cents.
Although uneventful, yesterday's broad market action was quite healthy. After two days of strong gains, it's actually preferable for stocks to take a breather. This enables the stock market to build a new base of support from which to stage its next rally. When stocks rally too much without at least a short period of rest, it's easier for the market to give back those gains. Brief periods of consolidation in between rallies increases the likelihood of gains remaining intact, at least in the short-term.
On the hourly chart of the S&P 500 below, notice the uptrend that has developed. It began with the low of March 17, and is anchored by the opening low of March 20:
Notice how the 20-period exponential moving average (the beige line) is about to converge with the hourly uptrend line (the ascending blue line). This commonly occurs in steady trends, and is the reason why the 20-EMA on the hourly chart often acts as support that enables a resumption of the trend. In downtrends, the 20-EMA conversely acts as resistance that drives stocks or indexes lower. Going into today, observe the price action of the S&P 500 as it tests support of the 20-EMA and hourly uptrend line. If these support levels push the S&P above its two-day high, we'll have confirmation that the broad market remains rather strong. But even if that fails to happen, the technical state of the broad market remains bullish, just as long as the S&P 500 holds support of yesterday's low. In the latter case, a new anchor point will be drawn to form a more gradual uptrend line off the March 17 low.
Our overall market bias remains the same. We're still bullish on the short-term, neutral to cautiously bullish on the intermediate-term, and bearish on the long-term. As always, this is not our opinion, but simply what the charts are telling us. Trade what you see, not what you think!
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:
Last week's Stalk of the Week, FSLR long, is working out quite well. It triggered for long entry at the $209 level, and is currently trading at $223, a gain of 14 points (6.7%). In The MTG Stalk Sheet, FSLR actually triggered for long entry at the $200.50 level.
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.
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:Rollercoaster volatility was the theme throughout the holiday-shortened week. The Market Segment ETFs ended higher, and most formed clear "swing lows" of price support. Notice that these "swing lows" are formed near the vicinity of the January lows, creating a bullish "double bottom" pattern that could lead to a tradable counter-trend bounce in the near-term. A rally in the Nasdaq 100 (QQQQ), above its prior "swing high" will trigger the first migration to a bullish bias. If triggered to the long side, QQQQ will lock in a gain of approximately 15% since triggering to the "descending trend" in November 2007.
Performing well last week was the Regional Banks (IAT), Real Estate (IYR), Retail (RTH), Pharmaceuticals (PPH), Software (SWH), and Financials (XLF). Most of these are in the "descending trend" list, but are staging counter-trend rallies. Acting particularly weak are the Broadband (BDH), Telecoms (IYZ), and Energy (XLE). Money began to rotate out of the high-flying commodities and currencies ETFs such as Commodities Index (DBC), Euro (FXE), Gold (GLD), Silver (SLV), Oil (USO), and Natural Gas (UNG). The breakdown in DBC was particularly brutal. We have tightened our stops to control the erosion of gains, as well as limit risk.
The Bond market posted nice gains after the lowering of yields. The mid-term bonds (IEF) made it to a new high. Only the Corporate Bonds (LQD) remains depressed.
The International markets did not recover very well. Canada (EWC), for instance, dipped lower to break its prior "swing low" levels. Hong Kong (EWH) continues to grind lower, along with other Asian markets. Brazil (EWZ) even crumbled and is now in the "descending trend" list. India (INP) and China (FXI) extended their trends in the "descending trend" list. Keep stops firm to preserve your gains and limit risk. Big moves in either direction could happen at any time without warning. Active participation at managing your stops is crucial right now. Additionally, well-timed, controlled risk is needed to benefit from the reflection points of trend reversals. The ETF Trend Tracker report gives you the tools you'll need to manage a profitable portfolio.
Regular subscribers to the ETF Trend Tracker may contact us for additional questions and a free 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!
Alert of imminent reversal to the upside: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.
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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! |
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!