Stocks finished higher across the board on Tuesday, and closed near the session high. All five major indices closed up, as volume improved slightly. The small-cap Russell 2000 led the charge with a day over day improvement of 0.7%. The Dow Jones Industrial Average climbed by 0.6%, while the Nasdaq and the S&P MidCap 400 both advanced by 0.5%. The S&P 500 was the session's laggard as it posted a 0.4% gain.

Volume was up modestly yesterday, but below its 50-day moving average on both indices. Turnover ended the day fractionally higher on the Big Board, and up by 3% on the Nasdaq. Advancing volume outpaced declining volume on both exchanges. The ratio of up to down volume ended the day at 1.8 to 1 on the NYSE and 1.2 to 1 on the Nasdaq.

PHO continues to exhibit strength and appears ready for another advance. A move above the 2-day high should attract further buying interest. Our FDN trade has performed well, but is approaching a key resistance level near $36.40. A modest pullback and/or few days of consolidation at the current price level would not be unexpected. Our short position in ECH has been playing out well. Should ECH lose support of its three day low ($69.87), further downside is likely. Volume spiked in PALL today, as it broke through resistance. Given this price and volume action in PALL, the wind appears to be in our favor. IJT seems primed to set new highs, while ILF continues to lag the broad market.

Emerging Market ETFs continue to exhibit relative weakness. The Global X/InterBolsa FTSE Colombia 20 ETF (GXG) is no exception. GXG could present a quality short setup if it finds support at the 200-day may and rallies back into resistance. We will be following this ETF closely for a potential short entry.



The Pharmaceutical HOLDRs ETF (PPH) recently undercut and reclaimed support of the 50-day MA. Further, over the past three days PPH has consolidated in a tight range. A volume fueled move back above the two day high of $65.77 may present a buy entry for this ETF.



Yesterday marked the seventh straight day the DJIA has closed in higher territory. July 2010 was the last time the Dow managed a similar performance. We remain bullish but our macro technical research continues to suggest the market may be weakening. Trade setups are becoming increasingly obvious and we are seeing an increased level of false breakouts. Despite the positive numbers being posted by the major indices, the market seems to lack broad conviction.

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.