Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Distribution Disturbs - July 15, 2011

|Includes: iShares MSCI Indonesia ETF (EIDO), EPU
MTG logo

The Wagner Daily - July 15, 2011
Concise technical analysis and picks of the leading global ETFs



Commentary:

Stocks fell across the board on brisk trade. All five major indices closed down on the session. The small-cap Russell 2000 led the plunge as it fell 1.5%. In a similar exhibition of weakness both the Nasdaq and the S&P MidCap 400 both shed just over 1.2%. The S&P 500 lost 0.7% while the Dow Jones Industrial Average slid just 0.4%.

For the second time in three days, market internals were bearish. Volume jumped across the board. On the Nasdaq turnover rose by 2.4% while on the NYSE it grew by 6.5%. Declining volume held the upper hand over advancing volume for the entire session. By the closing bell the spread ratio was at 4.5 to 1 on the NYSE and 3.3 to 1 on the Nasdaq in favor of declining volume. Given the uptick in volume and higher declining volume we would classify yesterday as a distribution day in the market. The higher volume clearly speaks to institutional participation in the decline.

Over the past four sessions as the broad market has been declining, the iShares MSCI Indonesia Investable Market ETF (NYSEARCA:EIDO) has continued to consolidate in a tight range. If EIDO maintains this relative strength, then when the market turns we would expect this ETF to be one of the first to rally. Ideally we would like to see EIDO undercut its 20-day moving average before a resuming a possible move higher as this serves to shake out the weak hands and simultaneously attracts short sellers. We like the prospects for EIDO and are monitoring this ETF closely for a possible entry.


The iShares MSCI All Peru Capped Index (NYSEARCA:EPU) has been in a significant decline since late 2010. Although this ETF has shown relative strength over the past several days, yesterday it formed a distinct reversal bar and may now be primed for a move lower. A drop below yesterday's low of $38.90 could present a short entry in this ETF.


Following last week's impressive rally the market has put two distribution days together this week. Yesterday's selloff places us at three distribution days in the past 12 sessions which raises concern. Caution is warranted in the face of such data.


The commentary above is an abbreviated version of our daily ETF trading newsletter, The Wagner Daily. Subscribers to the full version receive specific ETF trade setups with detailed trigger, stop, and target prices, as well as daily updates on all open positions. Intraday Trade Alerts are also sent via e-mail and/or text message, on as-needed basis. For your free 1-month trial to the full version of The Wagner Daily, or to learn about our other services, please visit morpheustrading.com.

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.