A choppy and indecisive session ended with mixed results yesterday, as the S&P and Dow logged substantial gains, but the Nasdaq remained stuck below the flat line. In the morning, bearish momentum from the previous day's weakness weighed on the broad market, but stocks caught a bid in the afternoon. The Dow Jones Industrial Average gained 1.3% and the S&P 500 rose 1.1%. However, relative weakness in the semiconductor and biotech sectors kept the Nasdaq Composite in check. The tech-heavy index, down 1.5% at its intraday low, finished 0.2% lower. The small-cap Russell 2000 slipped 0.1%, but the S&P Midcap 400 Index advanced 0.6%. The S&P and Dow closed near their highs of the day, but the Nasdaq and Russell settled around the upper third of their intraday ranges.

Total volume in the NYSE swelled 20%, while volume in the Nasdaq rose 16% above the previous day's level. In both exchanges, most of the increase came during the afternoon rally, The higher volume gain in the NYSE was a positive sign, as it enabled the S&P 500 to register a bullish "accumulation day." However, despite the Nasdaq trimming its intraday loss, it's discouraging the index was unable to make it into the plus column. In the NYSE, advancing volume exceeded declining volume by a solid margin of 3 to 1. Conversely, the adv/dec volume ratio in the Nasdaq was negative by 2 to 1.

Most international ETFs have roughly moved in lockstep with the U.S. markets since the correction in the U.S. markets that began two months ago. Although relative strength to the domestic broad market has been few and far between, one of the few international ETFs still maintaining a decent chart pattern is iShares Thailand Index (THD). Unlike all the main stock market indexes, and a vast majority of ETFs in any sector, THD is presently trading above its 20-day EMA. It is also just below its 50-day MA, which converges with resistance of its downtrend line from the April high. A rally above that downtrend line/50-day MA convergence, as well as a move above the June 3 "swing high," would present a potential buy entry point. The daily chart of THD is shown below:



In yesterday's commentary, we annotated a chart of S&P Retail SPDR (XRT) to illustrate the example that even strong stocks and ETFs will eventually move lower if weakness in the broad market persists. As such, given the current market environment, there is obviously a significant risk that a breakout above the downtrend line and 50-day MA in THD will fail to hold up. Nevertheless, with the S&P and Dow bouncing off major horizontal price support of their February lows, the potential reward is that THD could become one of the first ETFs to show new leadership if the broad market moves higher in the near-term. Furthermore, keeping a tight stop just below the break of the downtrend line, as well as reducing share size, are two ways to reduce risk, while still allowing for potential profits.

Since breaking out above resistance of its two-month base of consolidation on June 3, the U.S. Natural Gas Fund (UNG) has been acting well. The ETF moved higher in the following two sessions, then took a breather yesterday. Now, UNG is forming a "bull flag" formation on its daily chart. Take a look:



On the shorter-term hourly chart, UNG also pulled back to touch its 20-period exponential moving average (EMA). When a stock or ETF breaks out above a lengthy trading range, the first retracement to the 20-EMA on the hourly chart frequently leads to a speedy resumption of the new uptrend, and is one of our favorite methods for entering ETFs on a slight pullback. Therefore, traders who missed the initial breakout entry into UNG might consider buying on a rally above the upper channel of the developing bull flag pattern shown on the chart above.

Open ETF positions:

Long - UNG
Short (including inversely correlated "short ETFs") - GDX

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.