Stocks advanced for a third consecutive day but on mixed trade. The major exchanges also improved for a third straight day. The Dow Jones Industrial Average led the move as it rose by 1.3% on the session. The Nasdaq followed closely by posting an impressive 1.2% gain while the S&P 500 tacked on 1.0%. The small-cap Russell 2000 and the S&P MidCap 400 advanced by 0.8% and 0.7% respectively.

Market internals were mixed on Thursday. Volume was down 0.3% on the NYSE but rose 3.4% on the Nasdaq. The spread ratio ended the day at 3.3 to 1 on the NYSE and 4.3 to 1 on the Nasdaq in favor of advancing volume. Thursday's mixed internals did little to overshadow a strong day for the market. Nonetheless, we wouldn't classify yesterday as an accumulation day for the market.

Given the extent of the recent rally, now would be a good time to evaluate the state of the broad market. A brief look at the S&P 500 ($SPX.X) shows that we are at key resistance of the downtrend line and the 50-day MA. Over the next two trading sessions we would expect to see more short setups begin to develop. In most cases sharp reversals back into resistance following a protracted decline, offer the chance to get short.



The DB Commodity Index Tracking Fund has begun to exhibit signs of relative weakness ahead of the broad market. Yesterday, as the major indices were setting new four-day highs, DBC formed a reversal candle by overcutting its 20-day EMA and reversing to close near session lows. A move below the two-day low near $28.75 may provide a short entry trigger for this ETF. We are carefully monitoring DBC for a possible short entry.

 

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.