A wild session on Wall Street yesterday kept both the bulls and bears on their toes, as stocks whipped around in the fashion of a roller coaster ride. The major indices jumped higher on the open, rallied to recover all of Tuesday's losses in the morning, turned tail to plunge below the prior day's low in the afternoon, then zoomed back up to recover their losses in the final hour of trading. In the end, stocks finished the day about where they started -- significantly higher across the board. The Dow Jones Industrial Average gained 1.2%, the S&P 500 1.0%, and the Nasdaq Composite 0.8%. The small-cap Russell 2000 and S&P Midcap 400 indices climbed 2.3% and 1.2% respectively. All the main stock market indexes settled just above the middle of their intraday ranges, slightly giving the bulls the upper hand into the close.

Total volume in the NYSE rose 8%, while volume in the Nasdaq ticked 21% higher. With stocks showing substantial losses and volume tracking higher throughout the afternoon, it looked as though the S&P and Nasdaq were poised to suffer a round of institutional selling. However, the late-day reversal enabled the major indices to avert the label of a bearish "distribution day." In both exchanges, advancing volume exceeded declining volume by a margin of 2 to 1.

In yesterday's market analysis, we illustrated that SPDR Gold Trust (GLD) had pulled back to support of both its 50-day moving average and primary uptrend line. As if on cue, GLD indeed bounced off convergence of that support yesterday. However, it's still 2.9% below last week's high. Showing a "cleaner," less volatile pattern than GLD is its sibling, Market Vectors Gold Miners (GDX). Unlike GLD, which follows the price of the spot gold commodity (roughly at 1/10 the price of an ounce of gold), GDX is comprised of a basket of individual gold mining stocks. Although spot gold frequently shows relative strength to the gold mining stocks, it now appears the miners are showing bullish divergence to the spot price. Check out the setup in GDX on the daily chart below:



Like GLD, GDX gapped up sharply after the March 18 Fed announcement on economic policy. But unlike GLD, GDX has been consolidating in a tight, sideways range since then. GLD, conversely, has been drifting lower. GDX can be bought above yesterday's high of $38.49, as a breakout above that level could lead to another leg higher in the short to intermediate-term. Still, since gold is notorious for erratic price movements, consider keeping a tight stop below the February highs (around the $37.50 area) to protect against a failed breakout.

Yesterday, the major indices formed "doji star" candlesticks on their daily charts by closing at nearly the same prices as they opened. Clearly, indecision was the theme of the day, as the bulls and bears battled it out in a round of tug-of-war. In the end, we'd say the bulls again had the upper hand. Not only did stocks register a decent session of gains on higher volume, but the main stock market indexes also successfully tested and held support of their 50-day moving averages. Notice how yesterday's low in the S&P 500 perfectly coincided with support of its 50-day MA, a likely impetus for the closing rally off the low:



We concluded yesterday's newsletter by saying, "As long as the 50-day MAs hold up, and we don't see a session of higher volume selling, both the short and intermediate-term trends remain up." The Dow, Russell 2000, and S&P Midcap 400 indices all dipped below their 50-day MAs on an intraday basis, but recovered to close above them. The relatively strong Nasdaq Composite did not even dip to touch its 50-day MA yesterday. The potential for higher volume losses was definitely a concern throughout much of yesterday's session, but the late-day buying spree solved that problem. So, overall, we have no choice but to conclude the bulls are still in control for both the short and intermediate-term. Nevertheless, we would now like to see the broad market consolidate its recent gains for a few weeks, while leading stocks and sectors continue to move higher. A solid base of consolidation would provide stocks with a springboard from which to start another leg up, without moving up too far, too fast.

Open ETF positions:

Long - UGA, USO, SLV, HHH, UDN
Short - (none)

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and Morpheus Trading Group, a trader education firm launched in 2001 that provides daily technical analysis of the leading ETFs and stocks. For a free trial to the full version of The Wagner Daily or to learn about Wagner's other services, visit MorpheusTrading.com or send an e-mail to deron@morpheustrading.com.