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Laying low ahead of the Fed

Throughout the first half of yesterday's session, it looked as though the bears were finally going to have a day in the sun, but the bulls flexed their resilient muscles, enabling stocks to recover and close with mixed results. The Dow Jones Industrial Average edged 0.2% higher and the S&P 500 was unchanged. After falling nearly 1% in the morning, the Nasdaq Composite reversed to close only 0.2% lower. The S&P and Dow finished near their highs of the day, as the Nasdaq settled in the upper quarter of its intraday range.

Turnover eased across the board, enabling the Nasdaq to dodge a bearish "distribution day." Total volume in the NYSE was anemic, limping in 36% lighter than the previous day's level. Volume in the Nasdaq decreased 6%. In both exchanges, volume remained below 50-day average levels for the third straight day. Market internals were negative, but not by a wide margin. In both exchanges, declining volume outpaced advancing volume by a margin of less than 3 to 2.

Today, all eyes will be on the latest announcement on federal economic policy, scheduled to be reported by the Federal Open Market Committee (FOMC) at 2:15 pm EDT. While no change in the Fed Funds Rate is expected, Wall Street will be paying close attention to whether or not the Fed drops the verbage of keeping interest rates low for an "extended period" of time. Though there's been a bit of volatility, stocks have been little changed for the past two days, and volume has been light. Trader and investors have apparently been standing on the sidelines, but the release of this afternoon's announcement should provide the market with more direction. For now, we remain primarily in pullback buying mode, stalking strong ETFs for potential buy entry as they retrace to key support levels. Below are the charts of a few ETFs on our radar screen for potential buy entry in the near-term:







In addition to the setups above, we continue to monitor KBW Capital Markets SPDR (NYSEARCA:KCE) for a pullback to add additional shares to our existing position, as illustrated in yesterday's commentary. A bounce in CurrencyShares Euro Trust (NYSEARCA:FXE), into major resistance of its 50-day MA, also remains on our radar screen for potential short entry. If any of the ETFs above meet our criteria for buy entry, we'll promptly send an Intraday Trade Alert with details.

Open ETF positions:

Long - KCE, GDX
Short (including inversely correlated "short ETFs") - (none)
The commentary above is an abbreviated version of a daily ETF trading newsletter, The Wagner Daily. Regular subscribers receive daily updates on all open positions, as well as new ETF trade setups with detailed trigger, stop, and target prices. 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.

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