The Wagner Daily ETF Report For February 11 |
By Deron Wagner |
Published
02/11/2014
|
Stocks
|
Unrated
|
|
The Wagner Daily ETF Report For February 11
Once again tech stocks were relatively strong, with the Nasdaq Composite and Nasdaq 100 posting gains of + 0.5%. The S&P 500 lagged with only a + 0.2% gain, while the Dow Jones barely closed positive on the day at +0.05%.
Volume was lighter on the Nasdaq, preventing the Nasdaq Composite from logging a second straight accumulation day. Overall, the market volume patterns remain bearish with only one day of accumulation between the S&P 500 and Nasdaq in several weeks.
Even if the Nasdaq was to breakout to new highs, we would not expect a significant rally to emerge if the S&P 500 was unable to clear resistance of its 50-day moving average. What this simply means is that the odds favor the market trading in a range for a period of time, until conditions change (for better or worse).
Which is shortable? Russia, Brazil (and most of South America), and emerging market ETFs.
What is showing relative strength? Europe (Italy and Spain), Vietnam, natural gas (stocks and the commodity), and gold mining stocks
Italy ETF ($EWI) and Spain ETF ($EWP) have held up surprisingly well the past few weeks, and are still trading above their respective 10-week moving averages.
The 10 and 40-week moving averages are still trending higher on both weeks charts with a higher swing low in place (so far):
If both these ETFs hold up well during a market correction, they would make ideal buy candidates once the market settles down.
Along with Europe, we continue to see strength in natural gas stocks. First Trust ISE Revere Natural Gas ($FCG) is still holding the back side of the downtrend line, which is a bullish sign. However, the price action has failed to extend much beyond the 50-day MA.
We remain long $FCG from our $19.34 entry several weeks ago. For those who missed the first entry, a move above the three-day high is a low-risk buy point for those who wish to establish some exposure. Subscribers should use the protective stop price listed for $UNG in the open positions section of today's Wagner Daily.
In a bull market, despite late entry points and blowing stops, undisciplined traders can make still money, as a strong uptrend is a cure-all. However, when conditions turn sour, the undisciplined trader is often exposed, and the P&L can go from good to very bad in just in a day or two when swing trading with size.
Since it appears that the markets are range-bound, a test of the recent lows in the major averages (within the next week or two) would not be much of a surprise. Remember, do not overtrade this market!
Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.
|