Maintaining momentum from the previous day's strength, stocks advanced yesterday morning, then drifted in a narrow, sideways range throughout the rest of the day. Scoring their sixth consecutive day of gains, the major indices settled slightly higher across the board. The Nasdaq Composite rose 0.4%, the Dow Jones Industrial Average 0.2%, and the S&P 500 0.1%. The small-cap Russell 2000 ticked 0.2% higher, as the S&P Midcap 400 Index was unchanged. Showing a lack of direction into the close, the main stock market indexes finished between the upper half and upper quarter of their intraday ranges.

Turnover was mixed. Total volume in the NYSE increased 5%, while volume in the Nasdaq was 9% lighter than the previous day's level. Given the nearly flat closing price of the S&P 500 yesterday, the increased volume in the NYSE may have pointed to a bit of "churning," a stealth occurrence of institutional selling into strength. Nevertheless, the prior day's session was a confirmed "accumulation day," marked by solidly higher volume gains in both the S&P and Nasdaq. In the Nasdaq, advancing volume exceeded declining volume by a margin of just under 2 to However, the adv/dec volume ratio of the NYSE was marginally negative.

Over the past several days, we've been monitoring the S&P Healthcare SPDR (XLV) for potential buy entry on a move above resistance of its short-term downtrend line. Although the setup has not yet triggered for buy entry, key support of the 50-day MA just below yesterday's low could still provide an impetus for pullback buyers to re-enter the ETF, perhaps on a brief "undercut" of the 50-day MA. Though XLV may not be ready to go yet, iShares Nasdaq Biotech (IBB) is an ETF in the related biotech industry that could easily be in play within the next day or two. The daily chart below explains the setup:



For the past several weeks, IBB has been consolidating in a sideways range, neatly holding support of its 20-day exponential moving average (EMA). As such, a rally above near-term resistance, above the $93 area, could lead to a continuation breakout within its dominant uptrend. As with IBB, most ETFs poised to break out right now are merely continuation breakouts, due to the extended state of the broad market. As opposed to more substantial, first-stage breakouts of large bases of consolidation, the buying of continuation breakouts requires more caution. As we've briefly touched on over the past few days, reduced share size and tight stops, just below the breakout level, are effective ways to control risk when buying a continuation breakout.

An ETF in a similar situation to IBB is S&P Consumer Staples SPDR (XLP). Holding support of its 20-day EMA as it oscillates in a tight, sideways range for the past several weeks, XLP could provide short-term traders with a continuation breakout buying opportunity. As the chart below illustrates, a rally above the $28.20 level would represent a breakout entry, while an early, partial position entry could be had above the hourly downtrend line (the descending, dashed line):



Because it bears worth repeating in this environment where stocks seemingly move higher every day, we'll conclude today's commentary with the same friendly reminder that wrapped up yesterday's commentary: "Based on the market's resilience of late, it's easy to forget that markets move both up and down, but forgetting this basic concept can have extremely damaging consequences (as many investors learned in 2008). . .Go with the bullish trend while it lasts, but keep your running shoes nearby, just in case you suddenly need to sprint to the exit door."

Open ETF positions:

Long - IAI
Short (including inversely correlated "short ETFs") - TBT

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.