Equities closed strong amidst light volume for the second consecutive day. Price action was impressive as all five major indices saw gains of 1.2% or more. The small-cap Russell 2000 led the charge by posting an impressive 1.8% gain. The tech rich Nasdaq and the S&P MidCap 400 both improved by 1.5% as the S&P 500 and the Dow Jones Industrial Average advanced by 1.3% and 1.2% respectively.

For the second day in a row strong price action was dampened by mixed internals. Volume was down across the board following a very light volume day on Monday. Turnover on the NYSE fell by almost 4.0% and on the Nasdaq by 2.1%. However advancing volume overpowered declining volume by a factor of 5 to 1 on both major exchanges. Tuesday's mixed internals suggest a lack of institutional participation in the rally. Due to the very light volume we would not classify Tuesday as an accumulation on Wall Street.

EWM hit its buy trigger and then rallied to close at the high of the day. Trade details are available to our membership in the watchlist segment of the newsletter.

The broad market as measured by the S&P 500 is now at the key psychological resistance level of 1,300. If the S&P 500 find its way above this key mark then it will likely continue its advance to the 50-day moving average. If the S&P finds its way to this key mark we would expect it to be met with formidable resistance.



The iShares MSCI Italy Index ETF (EWI) has been in a massive selloff since early May. Since that time it has lost support of all of its key moving averages and has broken below a two-year uptrend line. Although EWI has managed to keep pace with the market over the past two days, it has done so on very light volume. EWI now faces serious resistance at the convergence of its 20-day EMA, 200-day MA, former uptrend line and current downtrend line. A rally into these key marks could provide a shorting opportunity for this ETF.



The market continues to struggle with gaining volume momentum. If hundreds of stocks were breaking to new highs we would be less concerned with the unimpressive volume. However, in light of the recent selloff the market now has considerable overhead and strong volume is generally needed to reclaim former support levels.

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.