The Wagner Weekly
May 26, 2003

Weekly ETF Snapshot

The broad-based indices shown below all broke their lower trend channels (#1 annotation on the charts) last week. This uptrend line has been in place since March 12, over two months. That's not exactly the formation of a rising trend we demand in a bullish rally. A new "swing low" may have developed, but we need to see a break above the highs of May 16 in order to confirm resumption of the uptrend. If new highs are made above last week's highs, then the trendline will be amended and the second anchor will be moved to the lows in mid-May. MDY (mid-cap) chart has a similar price pattern, but IWM (small cap index) is still trending above the lower trend channel. The small caps have been showing consistent strength in this latest rally. Here is a look at the major indices, along with their current trendlines. Click here for an explanation on understanding the chart annotations below:







Sector Notes:

A couple of sectors are showing signs of weakness: XLF (Financials) and XLB (Basic Industries). These sectors were among the first sectors to reverse trends along with IGV (Software) and RTH (Retail), within a short period of time last week. As you see, we can infer that these sectors are leading the latest signs of weakness detected in the broad indices.

The bond ETFs continue to be strong, and the typical inverse relationship between the bond and equities may show its hand this week. TLT (20+ yr T-Bond) is has been rising almost vertically, and is the most extended bond sector. Watch for a potential reversal, which would constitute a short entry.

On the international front, the Asian markets are improving daily and acting strong. We took a long position in EWJ (Japan Fund ETF) last week and plan on trailing a stop with a multi-week price target. The most recent Asian ETF to make the ascending list is EWH (Hong Kong).

Below is the chart of EWH where the following has occured: #1 indicates a break in the previous trendline, #2 is the swing high, the green up arrow is the candlestick that triggered the trend change and coincides with the Trend Signal Date, and finally the purple ellipse is the second anchor for this new ascending trendline. This also corresponds with the price low for the next trend reversal trigger that would represent a break of the uptrend. The difference between the triggered price, dotted line, and the current price close is indicated in the new "Change since Trigger" column as a percentage of the triggered price. Please review and print yourself a copy of the updated MTG Sector Trend Trigger List. Here is the EWH chart:



Click on this link to download this week's "Sector Trend Trigger" list (you will need the free Adobe Acrobat Reader to view the file).

Closing Thoughts:

Trading or investing for most of us is a personal pursuit to conquer the market. Its appeal is the potential for fabulous wealth, freedom to do it anytime, and there is no one to answer to for your mistakes. Success is directly related to and can be measured by the bottom line. However, we still need to be accountable to ourselves. To do this, keeping a daily journal may be an option. We can't learn about trading consistently without one. In it, we write our trades for tomorrow, comments about the current market and economic events, a review of recent trades that worked and ones that didn't work, and thoughts about the condition of yourself as it pertains to your health, how you feel, or anything that may affect your performance as a trader. Try it in a format you are comfortable with for a few days. It will get you on the right track to successful trades and consistently profitable returns.

Deron Wagner
MTG Founder and President

Chris Chang
MTG Associate Editor


Weekly Reality Report

Last week marked our ninth consecutive week of net profits. We nailed the May 19 selloff on the short side, which is where most of last week's profits resulted from. It's pretty cool to have a strong selloff day also become one of your most profitable days. Below is a summary of the performance of each MTG trade that was closed during the period of May 19 - 23, 2003. These stats represent combined net results from each trade we participated in, as called in The Wagner Daily and ETF Real-Time Room:

Click on this link to view detailed cumulative stats of each trade MTG has made (updated weekly).

Click on this link for a detailed explanation of how MTG calculates and reports its weekly trading results.


Remember that all previously published issues of both The Wagner Daily and The Wagner Weekly are available in the "Archives" section of the MTG web site. If you are new to our services and wish to broaden your knowledge of ETF trading or our general trading style, we recommend you browse the archives because they are very educational and it is free!


Odds and Ends

Due to the success of our recent seminar in Las Vegas, we have set the date for our next Live ETF Trading Workshop. This time, we will be going to Orlando, Florida on October 2 and 3. Mark your calendars because it is going to be even better than the Vegas seminar, complete with two full days of live trading! More details to follow.


Deron M. Wagner
Founder and President

Morpheus Trading Group
The Leader in ETF Trading!

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 Weekly ( 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 buy, sell or have a position 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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