A belated Happy Thanksgiving to all of our U.S. clients. Today's newsletter will be brief due to the holiday shortened trading session.

Wednesday's trading brought a spectacular price reversal for the major indices, but no accompanying volume. All of the indices closed up on the session. The small-cap Russell 2000 led the advance by posting a 2.3% gain for the day. The S&P MidCap 400 and the Nasdaq were up 2.1% and 1.9% respectively. The S&P 500 and the Dow Jones Industrial Average were the day's laggards. Still, they both realized solid gains approximating 1.4 % for the day.

Internals were mixed on Wednesday. Volume was dramatically down on both the NYSE and the Nasdaq. Volume was off by a whopping 20% on the NYSE, while Nasdaq turnover fell 14% day over day. However, advancing volume overwhelmed declining volume by a ratio of 10.4 to 1 on the NYSE and 7.1 to 1 on the Nasdaq. However, the lack of volume draws into question the force behind the rally. To confirm that the current rally off the November 16 swing low in the market is genuine, we will need to see at least one bullish accumulation day in a major average.

The DJIA and the S&P 500 have both been contained within a tight trading box for the past seven sessions. The S&P MidCap 400 has exhibited the most relative strength and looks poised to find a new 52-week high. It is followed closely by the Russell 2000. The key to the next move in the market appears to be in the hands of the recently directionless Dow and S&P 500.

On Wednesday we sent an alert that we were entering the United States Natural Gas Fund ETF (UNG). The following chart provides the rationale behind this entry. UNG has been consolidating since mid October. It is now consolidating above the short-term trend line, the 20-day EMA and the 50-day MA for the first time in months. During recent rallies volume has been increasing. Although this is a counter trend trade, it offers a reasonably safe entry point because of recent consolidation and accumulation. Further, it fits our technical criteria for reversal plays. For our subscribing members, trade details are posted in the watchlist segment of the newsletter.




As discussed, the Dow and the S&P 500 most likely hold the key to the next significant move in the market. Without confirmation from both indices, we are likely to remain range bound.

Note: U.S. markets will close at 1:00 pm ET today.

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.