Tuesday's trading saw the first significant slide in the major indices in almost two weeks. Small-cap and mid-cap stocks led the day's decline. The small-cap Russell 2000 shed 1.5% and the S&P MidCap 400 slid 1.1%. The S&P 500, Nasdaq and Dow Jones Industrial Average posted losses of 0.9%, 0.7% and 0.5% respectively. The major averages moved in a choppy range for the first 90 minutes of trading. At the 11:00 am reversal period the markets sold off sharply the majority of the day. The market did manage to pare some of its losses, as it bounced into the close.

Volume spiked significantly on Tuesday. Turnover on both the NYSE and the Nasdaq skyrocketed in Tuesday's session. Volume was up 22% on both the NYSE and the Nasdaq. On the NYSE, declining volume outpaced advancing volume by 4.2 to 1, while the Nasdaq saw declining volume beat advancing volume by a ratio of 2.2 to 1. Tuesday's market internals suggest Institutional distribution.

As discussed in Tuesday's newsletter, the Japanese Yen was showing signs of weakness. In Tuesday's trading session, the CurrencyShares Japanese Yen Trust (FXY) formed a significantly bearish reversal candle and plummeted below the 20-day EMA. In a single day of trading FXY dropped and closed below the September 19 low. The selloff was accompanied by a big spike in volume. The inverse of FXY demonstrated a mirror pattern. The ProShares Ultra Short Yen (YCS), blasted through resistance on Tuesday on massive volume. It closed well above the 20-day EMA. In the November 8 newsletter, we used the YCS chart to provide an example of a reversal setup. It was a timely example. Although YCS is not officially on the watchlist, we will be monitoring it closely for a possible buy entry. We will send out an alert should we enter the trade.







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.