Focus on the Real Estate ETFs

Turnover dropped off sharply after the previous day’s surge. Total volume in the
NYSE declined by 38%, while volume in the Nasdaq was 40% lower than the previous
day’s level. Market internals were negative, but not by a wide margin. In both
exchanges, declining volume exceeded advancing volume by a margin of just under
2 to 1.

Looking at the daily chart of ICF by itself, you can see the potential buy point
is over the horizontal price resistance over the $84 area. Notice also how ICF
attempted to break out on June 5, but failed and closed back down in its prior
trading range. Failed breakouts such as this are common when an ETF has relative
strength, but is fighting the trend of a weak broad market:

Because the overall market remains in a firm downtrend and has not yet shown any
clear signs of forming a bottom, we do NOT advocate taking a long position in
ICF at this point. Although it has relative strength, even the strongest stocks
and ETFs will eventually give way to the broad market direction if the trend
remains long enough. However, the reason we point out the Real Estate sector is
because it will likely be one of the biggest gainers when the market finally
does find support and bounces. Remember that the stocks and ETFs that don’t drop
when the broad market does are the first to breakout higher when the market goes
up. Therefore, keep ICF and the other Real Estate ETFs on your shopping list of
potential buys. The four different ETFs that track the Real Estate sector can be
found under the “Financial” section of the
Morpheus ETF Roundup
guide, which is free to download.

In terms of the “big picture,” each of the major indices except the Dow Jones
Industrial Average are hanging out just below their 200-day moving averages. The
Dow is fractionally above its 200-MA, although it probed below it intraday on
June 8. As we have mentioned on numerous occasions, the 200-day moving average
is closely regarded by institutions as a barometer of the market’s long-term
trend. Therefore, the longer the indices stay below their 200-MAs, the more
likely we are to see another wave of institutional distribution. However, with
the exception of the Nasdaq, none of the indices are below their 200-day MAs by
a wide margin and could easily snap back above them. Despite the broad market’s
losses last Friday, don’t forget that the previous session was a very high
volume reversal attempt. Although we are not yet seeing enough confirmation to
enter new long positions, we are wary of entering new short positions. Be on the
lookout for potential upside follow-through to the June 8 reversal day, but
don’t “jump the gun.”

Short (half position) DIA, long TLT and FXE (regular subscribers to

The Wagner Daily receive detailed stop and target prices on open
positions and detailed setup information on new ETF trade entry prices. Intraday
e-mail alerts are also sent as needed.)