Stocks were down across the board on Friday as trade increased. Price action was whippy as stocks lost ground early, reversed in the midmorning to reclaim session highs by 2pm but dropped once again to close in the lower third of the intraday range. By the closing bell all five manor indices were firmly in the red. The small-cap Russell 2000 slid 1.1% while the S&P MidCap 400 and the S&P 500 both dropped 0.8% on the day. The Nasdaq and the Dow Jones Industrial average both shed 0.7% by the closing bell.

Market internals cast a bearish shadow over the market on Friday. Volume increased on both exchanges as would be expected on an options expiration day. Turnover was up by 15.2% on the Big Board but only marginally higher on the Nasdaq. Declining volume outpaced advancing volume on the Nasdaq by a ratio of 2.2 to 1 and on the NYSE by a factor 2.7 to 1. Despite only a modest increase in volume on the Nasdaq we would still classify Friday as a distribution day for the market.

Yesterday we entered a long position in the UUP and a short position in IWM via intraday alerts. For our subscribing members, trade details are posted in the open positions segment of the newsletter.

After attempting to reclaim support of its 50-day and 20-day moving averages, the iShares MSCI EMU Index ETF (EZU) reversed sharply on Friday as it gapped down, sold off and closed near the lows of the session. A volume-fueled move back below yesterday's low of $38.66 could result in further distribution in this ETF.



Since gapping down on May 17 the PowerShares India Portfolio ETF (PIN) has exhibited relative weakness as it was unable to move higher with the market during the recent reversal and two day rally. Further, INP has been consolidating at its recent swing low for the past four sessions. A move below May 18 low of $22.16 may provide a short entry trigger for this ETF.



The broad market saw its seventh distribution day in the past four weeks on Friday which suggests the market is continuing to weaken. Given the recent selling into strength a followthrough to the downside on Monday could be the start of a difficult week for the market.

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.