Stocks closed modestly down on Wednesday, as four of the five major indices closed in the red. The price action could generally be considered positive as the market maintained a tight trading range after a strong two-day rally. The Dow Jones Industrial Average was the sole holdout on the day, as it closed just above the flatline. The Nasdaq closed just below par as it lost 0.1% yesterday. The S&P MidCap 400, S&P 500 and the small-cap Russell 2000 slipped by 0.2%, 0.3% and 0.4% respectively.

Yesterday's internals were mixed. Turnover fell across the board. Volume slipped on the NYSE by 14% and on the Nasdaq by 12%. Advancing volume was higher than declining volume on the Nasdaq by a factor of 1.7 to 1; while the NYSE saw declining volume outpace advancing volume by a factor of 1.9 to 1.

Yesterday afternoon we sent an alert that we were buying 300 shares of KOL at market. As always, trade details are posted in the watchlist segment of the newsletter. Should UNG move back above the 5-day high of $6.04, buying interest will likely spike. ILF moved back in our favor today, as it found resistance at the twenty and fifty-day moving averages.



The ProShares UltraShort MSCI Brazil ETF (BZQ) rallied back above its 50-day MA yesterday on increasing volume. A move above Wednesday's high of $16.62 may provide a long trigger for this inversely correlated ETF.



The Global X Uranium ETF (URA) rallied and broke out on massive volume two days ago (02/01/11). A pullback/undercut of the 20-period EMA ($21.50-$21.75 range) on the hourly chart below may provide a long entry trigger for this ETF. We will be following it closely for a possible entry.



The First Trust Dow Jones Internet ETF (FDN) recently undercut the 50-day MA, and is currently poised to break above a 10-day consolidation zone. A move back above $35.51 may present a long trigger for this ETF. We are placing FDN on the watchlist. For our subscribing members trade details are posted in the watchlist portion of the newsletter.



Based on today's price and volume action the odds now favor further upside. Nonetheless, rotation continues among ETF categories so there are pockets of weakness. In particular, emerging market ETFs continue to show weakness.

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.