Here’s my ETF roundup

As anticipated, yesterday was another lifeless session ahead of this afternoon’s Fed meeting on interest rates. Like the previous day, the S&P 500 drifted sideways within a tight three-point range, but this time the other indices showed moderate price divergence. Although the S&P 500 finished the day unchanged, the Dow Jones Industrial Average advanced 0.5% and the Nasdaq Composite fell 0.3%. Continued strength in the transportation sector helped lead the Dow higher, while a quarterly profit warning from Dell Computer weighed on the tech sectors that dominate the Nasdaq. The small-cap Russell 2000 was off 0.1%, while the S&P Midcap 400 lost 0.2%.

Although volume in the NYSE declined by 2%, total volume in the Nasdaq was 8% higher than the previous day’s level. Because the Nasdaq closed lower, but on higher volume, this means the index registered a bearish “distribution day” yesterday. It was the fifth such day of institutional selling within the past four weeks. A strong and healthy market can usually absorb two or three distribution days in this time period, but an extra degree of caution is required whenever the “distribution day” count exceeds four. The one positive, however, is that market internals were not that bad. In the Nasdaq, declining volume exceeded advancing volume, but by less than a 2 to 1 ratio. In the NYSE, advancing volume marginally beat declining volume.

As you might have expected, yesterday’s action did not change the current technical picture of the broad market. The Nasdaq’s loss caused the index to remain below resistance of its three-week downtrend line that we illustrated yesterday. Conversely, the Dow continued to power higher and is now only 110 points away from its all-time high. Looking purely at price action, the daily chart of the S&P 500 looks pretty good. The index broke out above its trading range on May 5, then followed with two consecutive days of narrow-range consolidation near the high:

In and of itself, this type of pattern is bullish and usually leads to new highs. However, one big factor that could disrupt the anticipated follow-through is the reaction to today’s Fed meeting. At 2:15 pm EST, the Federal Reserve Board will announce their decision on interest rates and provide a future outlook as well. While it is widely anticipated the Feds will raise interest rates for the sixteenth consecutive time, economists have mixed opinions on whether they will revise their policy statement for future rate increases. Whatever the outcome, remember the only thing that matters is the market’s reaction to the announcement.

Again, we recommend avoiding new positions ahead of the Fed announcement. With existing positions, be alert and have your stops in place when the announcement comes. As promised, we will take a thorough, updated look at the various industry sectors in tomorrow’s Wagner Daily. There are a few sectors with interesting chart patterns, but we first want to see how well they hold up after the afternoon announcement.

Do you ever get overwhelmed by the hundreds of exchange traded funds on the market or wish there was a quick and easy way to group all the different ETF families by sector and sub-sector? Perhaps you have been trying to find a speedy and efficient way to learn more about a particular ETF, such as the heaviest weighted underlying stocks? If so, we are confident you will appreciate that we have already done the hard work for you. As a reader of this column, we are pleased to present you with a complimentary copy of the brand new Morpheus ETF Roundup, a user-friendly reference tool that groups all the ETFs by sector and sub-sector, then allows you to easily compare the various fund families that offer a product within each group.

To download your FREE copy of the Morpheus ETF Roundup, simply click here or go to . You will need Adobe Acrobat Reader in order to open the file, but your computer probably already has that installed. If not, you can download a free copy of it by going to We are confident you will find the new Morpheus ETF Roundup to be a great reference tool. If you have any questions or comments on it, please send an e-mail to me.

Open ETF positions:

Long UTH, short XLE (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.)

Deron Wagner is the head trader of Morpheus Capital Hedge Fund and founder of Morpheus Trading Group (, which he launched in 2001. Wagner appears on his best-selling video, Sector Trading Strategies (Marketplace Books, June 2002), and is 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. He is also a frequent guest speaker at various trading and financial conferences around the world. For a free trial to the full version of The Wagner Daily or to learn about Deron’s other services, visit or send an e-mail to