Table of Contents


• MTG continues to handily outperform the stock market
• Broad Market Analysis - Time to sell short yet?
• MTG Stalk of the Week - ISRG short
• ETF Trend Tracker weekly commentary
• Recent live video interviews with Deron Wagner

Morpheus Trading Group has just updated its monthly performance statistics for all trades made in both The Wagner Daily and MTG Stalk Sheet.

Individual stock picks in The MTG Stalk Sheet fared quite well last month, netting a gain of just over 5%. The MTG Stalk Sheet is now showing a small year-to-date gain, despite a present loss of more than 5% in the S&P 500 during the same period.

Last month, we basically spun our wheels with ETF picks in The Wagner Daily, losing just 0.3%. However, our ETF picks year-to-date are still showing a whopping year-to-date gain of more than 23%! Click here to view a detailed analysis of our cumulative ETF and stock trade performance, as well as results of all individual picks.

As much of Wall Street anticipated, the Fed cut interest rates by a quarter point yesterday afternoon, and also hinted that further reductions in the federal funds rate will be put on hold. Stocks gained throughout the morning, briefly spiked higher after the 2:15 pm announcement, then sold off significantly shortly thereafter. The Nasdaq Composite lost 0.6%, the S&P 500 0.4%, and the Dow Jones Industrial Average 0.1%. The small-cap Russell 2000 declined 0.4%, as the S&P Midcap 400 slipped 0.1%. All the main stock market indexes settled at their intraday lows.

Turnover picked up across the board, causing both the S&P 500 and Nasdaq Composite to register a bearish "distribution day." Total volume in the NYSE increased 12%, while volume in the Nasdaq surged 24% above the previous day's level. In both exchanges, it was the second day of institutional selling in less than two weeks, putting pressure on the market's current rally attempt. Declining volume in both the NYSE and Nasdaq exceeded advancing volume, but only by margins of less than 2 to 1.

Although yesterday's actual losses in the broad market were moderate, the post-Fed price action of the major indices caused bearish patterns to form on their daily charts. The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average each jumped to new multi-month highs intraday, triggering traders' buy stop orders, but rapidly reversed to eventually finish the day just below their previous day's lows. This trapped the bulls who bought the failed breakout and caused the main stock market indexes to form bearish "inverted hammer" candlestick patterns on their daily charts. When this type of pattern occurs at the top of a recent range, it often marks a near-term top. When higher volume accompanies the inverted hammer, as it did yesterday, it's even more bearish. Below, we've circled this pattern on the daily candlestick chart of the S&P 500 SPDR (SPY), a well-known ETF proxy of the S&P 500 Index:

Throughout April, we were focused on the long side of the market, taking advantage of the intermediate-term countertrend bounce off the March lows. However, we now feel your best overall odds of profitability once again favor the short side of the market. Even before yesterday's inverted hammers, we started to test the short side of the market due to overhead resistance of the long-term downtrend lines that have been in place for the past seven months, as well as the 200-day moving averages of the major indices. The inverted hammer patterns, along with newfound weakness in leading stocks, simply helped confirm what we had already begun thinking -- the countertrend bounce within the primary bear market may be nearing an end.

In the April 2 issue of The Wagner Daily, we said, "[. . .] we expect continued strength for at least the next three to six weeks, [but] don't forget we're still in a primary bear market." Four weeks have passed since those comments were made, and the market showed the strength we expected during that time, but all bets are now off for buying ETFs that are directly correlated to the direction of the U.S. stock market. Only a sudden, unexpected rally to close above yesterday's highs would cause us to change our minds, which we have no problem doing if the market proves us wrong. Regular subscribers should note our trigger, stop, and target price below for the UltraShort S&P 500 ProShares (SDS), which moves inversely to the direction of the S&P 500, and at a margin of 2 to 1. We'll begin looking at additional short selling opportunities in the coming days.

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 Stalk of the Week is: