Potential short setup in (EWH) – The Wagner Daily
The Wagner Daily – March 8, 2011
Concise technical analysis and picks of the leading global ETFs
Commentary:
For the second consecutive day stocks closed lower, but managed to pare losses late in the session. Technology stocks got hit the hardest, as the small-cap Russell 2000, the Nasdaq and the S&P MidCap 400 dropped 1.6%, 1.4% and 1.3% respectively. The S&P 500 slid 0.8%, while the blue chip Dow Jones Industrial Average fell 0.7% on the session.
In a follow-up to Friday’s action, market internals ended the day mixed on Monday. Volume spiked by 15.4% on the Nasdaq, clearly suggesting institutional distribution. However, turnover on the NYSE was muted, as it fell just under 2% yesterday. The ratio of declining volume to advancing volume increased across the board yesterday. The ratio ended the day at 4.2 to 1 on the NYSE and 4.8 to 1 on the Nasdaq. Yesterday marked the fifth time in nine sessions that the Nasdaq has fell under distribution.
KBE hit its trigger yesterday and we entered a short position in this ETF. Overall the banking sector appears to be weakening, but our biggest concern is the recent lack of follow through in the market. Position details for KBE are posted in the watchlist segment of the newsletter.
Emerging market ETFs struggled yesterday and appear headed for another decline. The iShares MSCI Hong Kong Index ETF (EWH) could provide a short entry trigger below yesterday’s low of $18.49. We are closely monitoring this ETF for a potential entry point.
Last week we shorted the Retail HOLDRS ETF (RTH), but were stopped out of the position. Since then this ETF has continued to exhibit signs of weakness. A drop below yesterday’s low of $104.45 may provide a shorting opportunity for this ETF.
The major indices continue to probe their respective 50-day moving averages. The current chippiness in the market has made for difficult trading environment. As soon as momentum appears to be shifting (up or down) the market has reversed. The market has clearly lacked follow through in recent weeks.
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).
© 2002-2010 Morpheus Trading, LLC
Reproduction without permission is strictly prohibited.
