After a weak start to 2010, stocks found support in early February, then subsequently began working to recover the lost ground. It's now been a month that the major indices have been trending higher, off their recent lows. So far, both the price and volume patterns have not yet exhibited signs of bearishness. However, now that the rest of the major indices are catching up to the breakouts in small and mid-caps, the more closely-watched S&P, Nasdaq, and Dow will soon be testing resistance of their January 2010 highs. As they do, one should be prepared for a bit of turbulence and volatility. The areas of possible contention are annotated on daily charts of the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average below:
This week, traders and investors who bought at stocks at their January highs, and didn't quickly sell thereafter, may be looking to exit long positions into strength. Though it is never advisable for professionals to think in such a way, amateur retail investors often sell at levels "just to break even." This is called overhead supply, which is the reason that technical resistance levels are created. IF the S&P, Nasdaq, and Dow are destined to head back down, resuming the weakness they encountered at the beginning of the year, the January 2010 highs is the logical area where sentiment could start to change.
Obviously, the indices could blast right through their January highs, as the Russell and S&P Midcap indexes recently did. But a more likely scenario is that stocks will first encounter a bit of a pullback, or at least a "shakeout." As such, we're now monitoring our long positions closely, and will be taking a more pro-active stance to position management, just because of the anticipated volatility around the January 2010 highs. This means we may sell winning positions into strength of a sharp move higher and/or trail tighter stops at any onset of weakness. This further quantifies our March 5 commentary, where we specifically said, "If the S&P, Nasdaq, and Dow surge above their three-day highs today, those indexes could soon join the Russell and S&P Midcap at moving back to their January 2010 highs. But at that point, we would actually consider lightening up and/or tightening stops on long positions." So far, all of our long positions are looking good. If necessary, we'll keep subscribers updated of any stop changes via Intraday Trade Alerts.
Two weeks ago, in The Wagner Daily, we said it appeared the intermediate-term correction in the various emerging markets ETFs was nearing completion, as many of them were forming bottoming patterns. Anticipating institutional sector rotation back into the emerging markets, we subsequently bought iShares China Xinhua 25 (FXI) on February 26, as it broke out above its 20-day exponential moving average and a six-week downtrend line. Since then, FXI has been trending higher, and is presently showing a substantial unrealized gain. But let's take an updated look at the recent performances of two additional emerging markets ETFs, each of which could be considered for investors and traders looking for additional exposure in the emerging markets arena.
One of the smoothest-trending emerging markets ETFs over the past two weeks has been iPath India Index (INP; technically an exchange traded note [ETN], but trades like an ETF). While many emerging markets ETFs are just now moving back above their 50-day moving averages, INP surged right through its 50-day MA last week, and is now only 4% below its 52-week high from January of 2010. INP is probably too extended over the past few days to buy at its current price, but one can look for the formation of a "bull flag" pattern, or even a pullback to new support of its 50-day MA. Either could present a secondary buy entry over the next week or so. The setup is shown on the daily chart of INP below:
Consolidating in a tight range, just above its 50-day MA, iShares Brazil Index (EWZ) may soon break out above resistance of a three-month downtrend line. If it does, bullish momentum could send it sharply higher in the near-term. Below is the daily chart of EWZ:
Unlike INP, in which we're waiting for a pullback or some sort of short-term price consolidation, EWZ could be bought about 50 cents above yesterday's high of $72.56. However, because resistance of the three-month downtrend line is in the same vicinity, consider a very tight stop on the initial day of entry, perhaps around 50 - 75 cents below the entry. This will prevent getting stuck in a quick "stop run" that leads to a failed breakout. However, if EWZ triggers and closes strong, it makes sense to use a wider stop the following day, below the 50-day MA. As with all technical setups, be sure not to "jump the gun" with a premature buy entry ahead of the actual breakout trigger price.
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.
Morpheus Trading Group is pleased to announce their new membership on Twitter, a free service that keeps you informed of happenings with short text messages. In addition to selectively providing key market analysis, a heads-up of market-moving stocks is also provided from time to time. If you'd like to receive these alerts whenever they are sent, please sign up to follow us at http://www.twitter.com/morpheustrading.
By the way, don't worry about us overloading you with a flood of messages. We know your time is valuable and respect that.
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.
In last week's Stalk of the Week, we did a "charts to watch" session that listed three potential buy setups. One of those, Green Mountain Coffee Roasters (GMCR), triggered for buy entry last week, and the MTG Stalk Sheet is now long, showing an unrealized gain of 7 points as of today. Following is a review of that trade entry:
Subscribers to the MTG Stalk Sheet received an Intraday Trade Alert on the morning of March 2, notifying them of a buy entry into GMCR, as it was breaking out from a tight-ranged consolidation above the 20-day EMA:
Here is the subsequent price action after our entry, up through yesterday (March 8):
After our entry on March 2, GMCR pulled back on light volume over the next few days before breaking out to new highs with strong volume on March 8. We remain long with an unrealized gain of 7 points. Subscribers will be updated as to action regarding exit strategy.
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 Portfolio Tracker, e-mailed to subscribers last weekend. The Morpheus ETF Portfolio Tracker, a perfect supplement to The Wagner Daily, as a "long-only" user-friendly weekly report, including the new "short ETFs," that provides a replicable model ETF portfolio. Specific share size, entry, and stop prices, as well as annotated charts, are provided for all positions, and results of all trades are also tracked after the positions are closed. This information is e-mailed to subscribers weekly, and intraweek alerts are provided on an as-needed basis.
Commentary:After several days of tight consolidation, stocks broke out to close the week on a high note. The bullish action triggered the remaining broad-based indices back to ascending trend patterns. Traders are apparently back in accumulation mode once again; however, caution is required as the S&P, Nasdaq, and Dow test major resistance of their January 2010 highs. A substantial pullback and higher volatility near current levels would not be surprising. Nevertheless, stops on current open positions are placed wide enough to handle a normal correction.
Several industry sectors performed very well, several of which we're already positioned in. The Pharmaceutical HOLDR (PPH) could be construed as having relative weakness because it has not yet broken out, but a trigger to an ascending trend is imminent. The Semiconductor HOLDR (SMH) is building a base above its 50-day MA, and could be poised to resume its long-term uptrend off the March 2009 lows.
Not all ETFs in the Specialty sector performed well. The S&P 500 Volatility Index (VXX), which has a horrible correlation to the index it supposedly follows, posted another new all-time low last week. The Euro (FXE) is beginning to stabilize in the short-term, but a substantial bounce could present an intermediate to long-term buying opportunity in the UltraShort Euro (EUO). Also near its lows is Natural Gas (UNG), which accelerated lower from increased selling pressure.
The US Treasury Bond ETFs pulled back a bit, but Corporate bonds (LQD) gained strength. LQD built on the previous week's recovery, and it also rallied with the equity markets.
If you've not already had a trial to this dynamic "long-only" newsletter, designed to assist in managing long-term investment accounts such as IRAs, click to give it a test drive, free of charge for a month. If you decide to continue your subscription after the complimentary one-month trial, you may do so at the "no nonsense" rate of just $39 per month. You may also view actual past issues of the Morpheus ETF Portfolio Tracker by visiting our online archives.
Morpheus Trading Group is pleased to present you with a complimentary copy of the recently updated Morpheus ETF Roundup (v 3.0). Initially launched in May of 2006, the ETF Roundup is a user-friendly reference tool that groups all the ETFs by sector and sub-sector, then allows you to easily compare the various fund families that offer a product within each group. Confused by the approximately 800 different exchange traded funds on the market? Do you wish there was a quick and easy way to group all the different ETF families by sector and sub-sector? Want a speedy and efficient way to learn more about a particular ETF, such as the heaviest weighted underlying stocks? If so, we are confident you will appreciate that we at Morpheus Trading Group have already done the hard work for you!
With the Morpheus ETF Roundup, we have taken the entire universe of ETFs we trade (those with an average daily volume of at least 100,000 shares), and assembled them into this user-friendly, quick-reference database. With this guide, traders and investors can easily compare the various ETF fund families that are correlated to a particular sector or industry. Want to learn more about a particular ETF on the guide, such as the heaviest weighted underlying stocks? Simply click on any ticker symbol to jump to the web page for that fund. The Morpheus ETF Roundup is updated on an as-needed basis, in order to keep you abreast of major groupings of new ETFs as they are launched. The best part is. . .it's free!
If you experience any difficulties downloading the Morpheus ETF Roundup, please read the following troubleshooting tips:
Below are highlights of new additions to version 3.0 of the ETF Roundup:
We are confident you will find the newly updated Morpheus ETF Roundup to be a great reference tool. If you have any questions or comments on it, please send us an e-mail.
Enjoy! | Published by Bloomberg Press,
Wagner's new book dives into his ETF trading strategies. Learn how to profit from ETF trading in both up and down markets! |
|
If you like my style of ETF trading and investing, but always wanted to know more about it, this book's definitely for you. Within the book, I detail my entire "top-down" ETF sector trading strategy, discuss entries and exit strategies, and even walk through twenty real-life examples of ETF trades I've taken over the years (ten long, ten short). The book is now available in most retail bookstores, but can be ordered through Amazon.com at a discounted rate.
I'm quite confident you'll enjoy and learn a lot from the book, and I'm more than happy to personally address any questions you have upon reading it. Just shoot me an e-mail. By the way, if you enjoy the book (or even if you don't, ha ha), I sure would appreciate you posting a sincere review on Amazon.com.