Stocks bobbed and weaved through another non-committal day of trading before closing modestly higher yesterday. Resuming its pattern of relative strength, the Nasdaq Composite climbed 1.0%. The Dow Jones Industrial Average, however, was unchanged. The S&P 500 gained 0.4%. The small-cap Russell 2000 and S&P Midcap 400 indices advanced 0.6% and 1.0% respectively. Since the major indices traded in a narrow range throughout the session, the S&P and Dow registered "inside days." This means both their intraday lows and highs were contained within their respective ranges of the previous day. The Nasdaq managed to close above Monday's high, and just shy of its recent intraday high from June 5. As is frequently the case in indecisive markets, all the main stock market indexes closed near the middle of their intraday ranges.

Turnover was mixed. Total volume in the NYSE declined 2% below the previous day's level, marking the seventh consecutive day of declining volume, but trading in the Nasdaq increased 9% above Monday's lethargic pace. By gaining on higher volume, the Nasdaq technically scored a bullish "accumulation day." However, since volume was still below average, we couldn't get too excited about it.

Overall, yesterday's session was flat as the state of Florida (our sunny corporate home). Despite the small gains, the listless intraday price action did nothing to change the current technical view of the market. Over the past six days, the S&P 500 has been stuck in a tight, sideways range, marked by declining volume in each successive session. It's bullish that the index has been holding just above its 200-day moving average throughout this time, but there has not yet been any follow-through interest in pushing the market higher. Still, the good news is that this indecision won't last forever. In fact, it probably won't be more than a few more days until stocks make a convincing, decisive move out of the range. Whether that breakout will be to the upside or downside is a coin toss, but the lack of bearish short setups hints at the possibility of an upward move before seeing a significant correction.

Ten years ago, when I began my career as a professional trader, I was of the mistaken belief that I needed to be active in the market every day, or else I was being lazy and not doing my job. However, I eventually learned this was far from the truth. On the contrary, I discovered the most successful traders were actually out of the markets more than they were in the markets. Rather than being in the markets every day, I learned the most profitable traders laid low when nothing was going on, while being aggressive when trading conditions were ideal. My personal experience has proven this to be true. Over the course of my trading career, many of my biggest losing months have been the result of overtrading during low volume, choppy markets, not the result of suffering big losses in a bear market. Rather than adhering to our usual format of sharing individual trade setups we like, we thought new traders may appreciate this brief, yet very important psychology lesson. Similarly, experienced traders may appreciate a reminder on the dangers of overtrading when there's not much going on.

If your recent trading results have been disappointing, ask yourself if you've been forcing too many mediocre trades, rather than patiently waiting for the perfect setups to come your way. As for this newsletter, we were flat just two days ago, and are now minimally positioned with iShares Silver Trust (SLV), which we bought on a nice pullback to key support, and iShares Nasdaq Biotech (IBB), which is exhibiting early signs of relative strength. We're quite content to be mostly in cash right now, but will happily jump back into the markets, more aggressively, when strong volume combines with decisive price action. Focus on catching the meat of the moves in the stock market, not every little nook and cranny. Above all, remember to "trade what you see, not what you think!"

Open ETF positions:

Long - SLV, IBB
Short - (none)

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.