Don’t Chase The Market – (EUO) (EFA) – The Wagner Daily
The Wagner Daily – November 21, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:Commentary:
Stocks ended the session split amidst see-saw price action on Friday. Among the major indices, the day’s only winner was the Dow Jones Industrial Average. The blue chip index eked out a 0.2% gain. Both the small-cap Russell 2000 and the S&P 500 ended the session flat while the S&P MidCap 400 closed fractionally lower. The Nasdaq struggled the most on Friday, as it slid 0.6%.
Market internals ended the session mixed. Volume was down sharply on the Nasdaq but only fractionally lighter on the NYSE. By the closing bell trade had dropped a healthy 21.2% on the Nasdaq but was only 0.6% lower on the NYSE. Advancing volume marginally outpaced declining volume on the NYSE by 1.1 to 1. However, on the Nasdaq declining volume held the upper hand as it topped advancing volume by a ratio of 1.6 to 1. Although Friday did not bring a third consecutive distribution day, the market was unable to bounce on the heels of two distribution days. Our market timing model has registered a sell signal and for the moment, we are inclined to avoid the long side of the market.
For the past four sessions the ProShares UltraShort Euro ETF (EUO) has been consolidating just above its 20-day and 50-day moving averages. A volume assisted move above the two day high of $18.91 could provide a buying opportunity in this inverse ETF.
During the recent market rally the iShares MSCI EAFE Index ETF (EFA) has shown relative weakness as it was unable to even get close to its 200-day MA. EFA is now below support of all of its moving averages. A move below the two day low of $49.03 could present a short entry trigger for this ETF.
Trading has been difficult lately as the market struggles to find an identity. Although many stocks were showing promise as potential new leaders, the market has lacked follow through. We are now inclined to look for short entries but will likely look to trade with small size. As of this writing it appears as if the market will gap down sharply on Monday morning. We have no desire to chase the market lower should a big gap down occur.
Deron Wagner is the Founder and Head Portfolio Manager of Morpheus Trading Group, a capital management and trader education firm launched in 2001. Wagner is the author of the best-selling book, Trading ETFs: Gaining An Edge With Technical Analysis (Bloomberg Press, August 2008), and also appears in the popular DVD video, Sector Trading Strategies (Marketplace Books, June 2002). He is also co-author of both The Long-Term Day Trader (Career Press, April 2000) and The After-Hours Trader (McGraw Hill, August 2000). Past television appearances include CNBC, ABC, and Yahoo! FinanceVision. Wagner is a frequent guest speaker at various trading and financial conferences around the world, and can be reached by sending e-mail to: deron@morpheustrading.com.
DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for information purposes only and should not be construed as an offer or solicitation of an offer to buy or sell any securities. Morpheus Trading, LLC (hereinafter “The Company”) is not a licensed broker, broker-dealer, market maker, investment banker, investment advisor, analyst or underwriter. This discussion contains forward-looking statements that involve risks and uncertainties. A stock’s actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by The Company. Please consult a broker or financial planner before purchasing or selling any securities discussed in The Wagner Daily (hereinafter “The Newsletter”). The Company has not been compensated by any of the companies listed herein, or by their affiliates, agents, officers or employees for the preparation and distribution of any materials in The Newsletter. The Company and/or its affiliates, officers, directors and employees may or may not buy, sell or have positions in the securities discussed in The Newsletter and may profit in the event the shares of the companies discussed in The Newsletter rise or fall in value. Past performance never guarantees future results.
Charts created by TradeStation (tradestation.com).
(C) 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.
