ETF Portfolio Tracker commentary – Week beginning November 29, 2009

 As we close out another month of trading, the main stock market indexes are near their lowest levels of the last two weeks, but remain higher for the month.  This coming week, we will see if there is any bearish follow through to the broad‐based weakness of last Friday’s abbreviated trading session.  If the pattern of the past several months continues, the stock market will soon need to find support and stage another rally into new high territory.   The short‐term trend is best classified as choppy and range‐bound, but the longer‐term uptrend off the March 2009 lows remains intact.  Small‐caps (IWM) and mid‐caps (MDY) are showing the most relative weakness.  Their November lows were lower than their October lows, and their November highs are lower than their October highs.  This continued relative weakness in the small and mid‐caps may be negative for the broad market, but sector rotation into large‐cap equities may keep the rally alive.  The light holiday volume in our domestic markets throughout most of last week meant other global markets may have had more influence over the direction of industry sectors last week.  It was business as usual in other global exchanges, and all the weakness was translated into a sharp gap down on Friday’s open.  Still, stocks closed that day well off the opening lows.    The Japanese Yen (FXY) jumped higher, to a level that may be characterized as the early stages of a climatic run.  The Yen has been moving independently of the US Dollar.    A rotation into the fixed‐income (bond) ETFs was observed, especially in the short‐term bond ETFs.  Corporate Bonds (LQD) was range‐bound, but remains near its recent highs.  The treasury bonds were higher across the board.  Due to being in “SOH mode” (sitting on hands) in recent weeks, we now have a hefty cash position that is ideal for the high volatility that may be ahead in the near‐term.  We’re also monitoring the broad‐based ETFs for potential pullback entries.   

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TICKER DESCRIPTION % PORTFOLIO SHARES ENTRY ENTRY DATE LAST STOP CURRENT RISK POINT GAIN CURRENT P/L

None 0.00 $0.00

Notes: Last Friday's bearishness caused the major indices to finish below their recent highs. We'll be monitoring the next pullback for potential buy entry.

None 0.00 $0.00

GLD SPDR Gold Trust (GLD) 19% 200 94.70$ 09/02/09 115.06$ 100.17$ 12.94% 20.36 $4,070.00

FAZ Financial Bear 3x (FAZ) 5% 252 19.79$ 10/22/09 21.24$ 18.10$ 14.78% 1.45 $362.88

Notes: The rally in GLD is getting parabolic. As such, we are looking to sell partial share size into strength, in order to lock in a very large gain. We'll send an alert when we do so.

None 0.00 $0.00

0.00 $0.00Notes: We observed rotation into the safety of T-bonds last week, especially shorter-term bond ETFs (SHY). Corporate Bonds (LQD) consolidating near its highs.

n/a Cash 76% 76000 1.00$ n/a 1.00$ n/a n/a n/a n/aNotes: We have a strong cash position to protect against volatility right now. We'll look to deploy cash after seeing whether or not last Friday's sell-off leads to further weakness.

% Exposure Open P/L

24% $4,432.88

CASH

Current Portfolio % Change Cum. S&P 500 Return

SUMMARY OF OPEN POSITIONS AND CUMULATIVE RETURNSCum. Portfolio Return

21.31%2.45%

Number of Open Positions

Two (2) 4.43%

Morpheus ETF Portfolio TrackerSunday, November 29, 2009

SPECIALTY

BONDS

INDUSTRY SECTOR

Notes: More International ETFs are showing relative weakness compared to our domestic markets. However, Brazil (EWZ) is holding well near its recent highs.

INTERNATIONAL

Notes: Several industries are showing choppy price action. XLU, for example, is breaking swing highs and lows, but without follow through. This causes expanded trading ranges.

BROAD-BASED

Copyright 2008 - 2009, Morpheus Trading, LLC

DISTRIBUTION WITHOUT PERMISSION IS STRICTLY PROHIBITED.ETF charts courtesy of MetaStock.

TICKER DESCRIPTION SHARES ENTRY POINT GAIN NET P/L

USO US Oil (USO) 231 38.91$ (1.33) (311.85)$

UUP U.S. Dollar Index Bull (UUP) 1326 22.61$ (0.49) (676.26)$

TICKER DESCRIPTION NOTES

SHY 1-3 Yr T-Bonds (SHY)

Notes: USO and UUP failed to hold support in this low-volume environment.

ENTRY DATE

Sunday, November 29, 2009

09/15/09 37.58$ 11/27/09

10/30/09 22.12$ 11/25/09

Buy limit $84.15, Stop $83.70, Use 15% allocation; Pullback entry setup. Funds rotating into T-Bonds, and SHY is the best in its class.

Morpheus ETF Portfolio Tracker

Closed Positions (since last report)PRICE CLOSED CLOSED DATE

ETF Watchlist (potential entries in the coming week)

Financial Bear 3x (FAZ), 5%

SPDR Gold Trust (GLD), 19%

Cash, 76%

Morpheus ETF Portfolio - Current AllocationFinancial Bear 3x (FAZ)

SPDR Gold Trust (GLD)

Cash

Copyright 2008 - 2009, Morpheus Trading, LLC

DISTRIBUTION WITHOUT PERMISSION IS STRICTLY PROHIBITED.ETF charts courtesy of MetaStock.

Morpheus ETF Portfolio Tracker Subscriber Guide

To get the most out of your subscription, please take a few minutes to print and review this user-friendly guide that concisely explains how to best utilize the Morpheus ETF Portfolio Tracker. Also, if you have not already done so, please download and print the Morpheus ETF Roundup, an excellent reference tool that summarizes the entire universe of ETFs we monitor on a regular basis. If you ever have any questions or comments, please e-mail us.

1.0 – What is the Morpheus ETF Portfolio Tracker? How will I benefit?

The ETF Portfolio Tracker is a comprehensive, user-friendly weekly report that provides a replicable model ETF portfolio to investors and traders with long-term investment accounts of any size. Unlike traditional portfolio management, our ETF selection is based primarily on technical, rather than fundamental, analysis. As such, the duration of our holding term is dependent on how long each ETF maintains its primary trend. On average, positions are held for a few weeks, up to several months. Thanks to the advent of inversely correlated “short ETFs,” such as those available from ProShares, the ETF Portfolio Tracker is also a dynamic “long only” portfolio that is designed to profit in bull and bear markets alike. This specifically makes the service ideal for management of non-marginable retirement accounts, such as IRAs, in all market conditions.

Like its shorter-term sibling newsletter service, The Wagner Daily, the ETF Portfolio Tracker provides subscribers with specific share size, entry, and stop prices, as well as annotated charts, for all positions in the model ETF portfolio. Results of all trades are also tracked after the positions are eventually closed. This “hand holding” approach for beginning investors, and full guidance for advanced investors, makes it easy to mirror the positions of the model ETF portfolio in one‟s personal investment account.

The ETF Portfolio Tracker is e-mailed every weekend, so that subscribers who are not able to actively monitor the markets throughout the week have plenty of time to manage their accounts. Further, Intraweek Alerts are sent, via e-mail and optional text message to your mobile phone, on an as-needed basis.

2.0 – Sample screenshot of the model ETF portfolio and how to use it . . .

Ticker – Lists the ticker symbols of all ETFs currently in our model portfolio. Note that each ticker symbol is linked to an annotated chart of the ETF. When connected to the Internet, clicking on any ticker symbol opens a chart that enables you to see key notes and annotations, updated weekly.

Description – Displays the name of each ETF in our model portfolio.

% Portfolio – Lists the current percentage allocation of each ETF in our model portfolio. The model ETF portfolio is based on a non-marginable account size of $100,000. Therefore, a 20% allocation of an ETF would equate to a capital exposure of $20,000. But regardless of your own personal account size, correspondingly similar allocations can be achieved by simply mirroring the percentage allocations. A 20% allocation in a $30,000 account, for example, would equate to a capital exposure of $6,000. With brokerage commission fees so low these days, even the smallest investment accounts can participate effectively.

Shares – Shows corresponding share size of each position, based on the percentage allocation within the model portfolio, as well as the price of the ETF at time of entry (the next column). Using the example of “SH” from the screenshot above, here is how share size is calculated:

20% of portfolio = $20,000; Entry price = $86.26; $20,000 / $86.26 = 232 shares

If, for example, your total personal account size is $50,000, the same 20% allocation would equate to a position size of 116 shares ($10,000 / $86.26 = 116 shares).

Entry – Indicates the price at which we bought the ETF in our model account. New entries are made either through pre-determined buy stop parameters listed in the “ETF Watchlist” section of each weekly report, or via Intraweek Alert to your e-mail and/or mobile phone. If an ETF position is a new entry to the current week‟s report, the entry column will be shaded in green color.

Whenever a new ETF entry is made, the entry price will be the approximate market price at 9:35 am ET the following morning. Because the opening ticks of some ETFs are not representative of actual fair market values, we always wait until the first five minutes has passed before buying a new ETF. The easiest way to do this is to use a brokerage firm that allows investors to set conditional orders that prevents a buy or sell order from going live until a specified time of day. TradeStation is one such firm, but there are others as well. Alternatively, one can set an order to buy at market open, but if doing so, realize the actual execution prices may vary slightly from our reported entry prices.

Entry Date – This is the date the position was bought. Last – This is the current price of the ETF, based on the last trade date before weekly publication of the report (typically Friday‟s close of trading). Stop – This column lists the price at which we will eventually sell the position. All stops are “stop market” orders, which can be set with your brokerage firm as “GTC (good „til canceled)” orders. However, as with our entry rules, our stops do not go live until 9:35 am ET (again, consider a broker that allows conditional order entry). We suggest getting in the habit of automatically setting your stop order immediately after buying the position, then adjusting your stop orders whenever changes are made to our stop prices. Rather than using “target” prices to exit positions, we use a trailing stop strategy to allow unrealized gains to accumulate. We then simply allow positions to hit our trailing stops to lock in maximum gains. This strategy prevents us from limiting potential gains on strongly trending ETFs. In each week‟s report, any changes to the stop price from the previous week‟s report will be shaded in light red color for quick and easy reference. Current Risk – Percentage risk is calculated based on the distance to the current stop price from the last (not entry) price. Basing the risk percentage from the “LAST” price, rather than the “ENTRY” price, enables subscribers to know how much risk is involved if they missed the initial entry price, but bought right now instead. As stops are trailed tighter, the risk will obviously decrease. In situations where initial risk percentage is higher than usual, portfolio allocation percentages are reduced in order to limit total capital risk exposure. Point Gain – This shows us how many points the ETF has moved since our original entry price.

Current P/L – If the position were closed right now, this is the profit or loss (P/L) that would be realized, based on our $100,000 model account. The P/L is calculated by multiplying the number of “SHARES” with the “POINT GAIN” value, and includes realistic commission fees of 1 cent per share to cover the cost for the entry and exit.

3.0 – Tracking performance using Closed Positions Any ETF positions that hit their “STOPS” and were closed at some point during the week are listed in this section. Complete net results of the trades are reported here, and are subsequently logged to our cumulative performance statistics. We record the ETF that closed, its entry/exit prices and dates, the point gain, and the net P/L, relative to the amount of shares closed. This makes it easy to follow each position‟s performance when the ETF is sold. Note that only positions closed since the prior week‟s report are shown here; the cumulative log of past trades is found in the performance statistics displayed on the MTG web site.

4.0 – Finding the next investment opportunities with the ETF Watchlist This section gives you an early “heads-up” of ETFs we are stalking for potential buy entry in the near future, along with details of what we‟re looking for. We regularly monitor the performance of more than 300 ETFs, and inspect each chart pattern individually to determine whether it qualifies for entry to the ETF Watchlist portion of our model ETF portfolio. In many cases, specific, detailed trade parameters for entry are listed. In that case, assume we will enter the trade if the “buy stop” price is reached. Alternatively, if entry price details are not provided, we will only enter a new position if a specific Intraweek Alert is sent to your e-mail after the close of trading. DISCLAIMER: There is a risk for substantial losses trading securities and commodities. This material is for informational and educational purposes only, and should not be construed as an offer, or solicitation of an offer, to buy or sell any securities. Morpheus Trading, LLC (dba Morpheus Trading Group) 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 security‟s actual results could differ materially from descriptions given. The companies discussed in this report have not approved any statements made by Morpheus Trading, LLC. Please consult a broker or financial planner before purchasing or selling any securities discussed in the ETF Portfolio Tracker. Morpheus Trading, LLC 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 ETF Portfolio Tracker. Morpheus Trading, LLC and/or its affiliates, officers, directors, and employees may or may not buy, sell, or have a position in the securities discussed in the ETF Portfolio Tracker, and may profit in the event the shares of the companies discussed in the ETF Portfolio Tracker rise or fall in value. Past performance never guarantees future results. Use of the ETF Portfolio Tracker implies agreement to these terms.