Stocks closed lower on Tuesday on higher trade. For the second time in as many days all five major indices closed in the red. The Dow Jones Industrial Average led the decline as it shed 0.7% on the session. The S&P MidCap 400 and the S&P 500 fell by 0.6% and 0.4% respectively. The small-cap Russell 2000 fell by a modest 0.2% while Nasdaq slid fractionally.

Market internals were bearish on Tuesday. Volume increased by 8.6% on the Nasdaq and 9.4% on the NYSE. Declining volume held the upper hand on both exchanges. By the closing bell the Spread Ratio was at 1.6 to 1 on the NYSE and 1.2 to 1 on the Nasdaq in favor of declining volume. Tuesday's internals point to a modest distribution day on both exchanges.

Over the past two weeks, the SPDR S&P Retail ETF (XRT) has been bullishly consolidating above its 20-day EMA. A volume fueled moved back above the July 21 high of $55.31 could present a buying opportunity in this ETF. We are placing XRT on the Watchlist. Trade details are available to our subscribing members in the watchlist segment of the newsletter.



The SPDR S&P Select Health Care ETF (XLV) has been consolidating in a tight trading range near its all-time highs since May of this year. XLV is now in the midst of a pullback to the lower edge of this trading range. Should XLV hold support at the current level, it may provide a buying opportunity with a move back above the July 21 high of $31.79. We will continue to monitor this ETF for a possible long entry.

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The market continues to struggle to find direction. Because of the choppy price action our daily scans are revealing few quality trading opportunities on either side of the market. We are patiently awaiting the next news out of Washington.

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.