Stocks closed modestly lower yesterday and well off the session lows. Trade was mixed on the session. However, as of this writing, the DJIA, Nasdaq and S&P futures are all trading down over 2%. With the Nikkei down over 17% in two sessions, a sharp selloff in the US markets would not come as a surprise. All five major indices closed in the red yesterday. The small-cap Russell 2000 ended the day lower by 0.7%. The S&P 500 slid 0.6%, while the S&P MidCap 400 and the Nasdaq both shed 0.5%. The Dow Jones Industrial Average demonstrated the most resiliency as it dropped only 0.4%.

Market internals were mixed on Monday. Volume dropped by just over 4% on the Nasdaq but increased by 6% on the NYSE. Declining volume outpaced advancing volume by a ratio of 2.3 to 1 on both indices.

Via an intraday alert, we opened a short position in the Retail HOLDRS ETF (RTH) yesterday. For our subscribing members, trade details are available in the open positions segment of the newsletter.

Our position in the ProShares UltraShort QQQ ETF (QID) appears ready for another advance. A volume-fueled move back above the two-day high of $54.46 may provide an opportunity to add to the position.



In the March 9 Newsletter we stated that, "The iShares MSCI Turkey Investable Market Index ETF (TUR) has been in a "stair step" downtrend since November of 2010. A rally back into the downtrend line or the 50-day MA could provide a short entry for this ETF." Yesterday, TUR rallied into the 50-day MA. Given current market conditions, we wouldn't be surprised to see a quick reversal in this ETF. For ease of comparison, the March 9 chart of TUR has also been provided below.



Based on the sharp selloff in the Asian markets overnight, we anticipate similar action in the US markets today. Market leadership appears to be waning and our overnight research revealed a complete absence of potential long setups. For the moment, it appears that we are well positioned to participate in a possible market reversal. Due to market conditions we are more likely to open new positions intraday than by predetermined setups. This is often our approach during sharp reversals and whippy market action, as gaps become commonplace.

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.