Stocks ended Wednesday's session slightly higher but on declining volume. The Nasdaq saw the greatest improvement on the day. The technology-rich index tacked on 0.6%, as it closed back above the 50-day MA. The S&P MidCap 400 and the small-cap Russell 2000 rallied by 0.3% and 0.2% respectively. The Dow Jones Industrial Average and the S&P 500 finished the day fractionally higher.

Market internals were mixed yesterday. Turnover ended the day lower on both exchanges. Volume declined by 4.6% on the NYSE and by 4.1% on the Nasdaq. Declining volume was slightly higher than advancing volume on the Big Board by a ratio of 1.2 to 1. On the Nasdaq, advancing volume outpaced declining volume by a factor of 1.8 to 1. Given the lack of volume and indecisive price action, it appears that institutional investors were not actively involved in the market yesterday.

The First Trust Global Wind Energy ETF (FAN) could be in the process of forming a bullish mini-cup and handle-like technical pattern. This ETF saw a dramatic decrease in volume yesterday which is often considered bullish during a period of consolidation. Ideally we would like to see FAN consolidate for the next several days just below resistance at $11.97 before attempting another breakout. This would provide a stronger support level in the event of a false breakout. Consolidation is important because it attracts both bulls and bears. The more bears that get involved during this "discussion" period, the more likely a breakout is sustainable because of short covering. Nonetheless, FAN could catapult to new highs if it breaks through resistance at $11.97 prior to forming a significant handle.



The PowerShares Dynamic Food & Beverage ETF (PBJ) recently undercut its 20-day EMA and rallied back into the trading range on a spike in volume. Yesterday this ETF gapped up and sold off on dramatically lower volume. A volume-fueled move back above yesterday's high of $19.22 could provide a buying opportunity. Under ideal circumstances we would prefer to see a one to two-week period of consolidation prior to any move higher.



The major indices tested Tuesday's lows and found support. The Nasdaq managed to find its way back above the 50-day MA but on lighter volume. As discussed in yesterday's newsletter, the market is at a critical pivot point and caution is warranted.

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.