After an opening gap up, stocks closed near session high amidst choppy intraday trade. All five major indices posted solid gains as the Dow Jones Industrial Average and small-cap Russell 2000 led the way with solid 2.3% gains. The S&P MidCap 400 rose 2.2% while the S&P 500 moved higher by 1.9%. The Nasdaq once again lagged but still managed a 1.5% gain.

Market internals were mixed as volume slipped on the Nasdaq by 2.4%. However, NYSE volume climbed by an impressive 18.6%. Advancing volume outpaced declining volume on the Nasdaq and the NYSE by 4.1 to 1 and 6.3 to 1 respectively. The NYSE posted another accumulation day as evidenced by the strong volume.

On October 20, the PowerShares Emerging Markets Sovereign Debt ETF (PCY) formed a reversal candle as it overcut resistance at $27.00 on a significant spike in volume. Furthermore, PCY formed another reversal candle on Friday. A move back below the four-day low of $26.83 could present a short entry trigger for this ETF.



The PowerShares Insured National Municipal Bond ETF (PZA) has recently undercut support of its long term trendline and key moving averages. PZA is not attempting to reclaim support of these key marks. A volume assisted move above Friday's high of $24.06 could present a buying opportunity in this ETF. We will be monitoring PZA closely for a potential entrypoint.



The market continues to demonstrate strength. However, we are approaching key resistance levels on all the major indices and they appear to be overextended. Consequently, we are inclined to wait for a pullback should we decide to enter any long positions.

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.