Stocks ended the session split amidst seesaw price action on Friday. Among the major indices, the day's only winner was the Dow Jones Industrial Average. The blue chip index eked out a 0.2% gain. Both the small-cap Russell 2000 and the S&P 500 ended the session flat while the S&P MidCap 400 closed fractionally lower. The Nasdaq struggled the most on Friday, as it slid 0.6%.

Market internals ended the session mixed. Volume was down sharply on the Nasdaq but only fractionally lighter on the NYSE. By the closing bell trade had dropped a healthy 21.2% on the Nasdaq but was only 0.6% lower on the NYSE. Advancing volume marginally outpaced declining volume on the NYSE by 1.1 to 1. However, on the Nasdaq declining volume held the upper hand as it topped advancing volume by a ratio of 1.6 to 1. Although Friday did not bring a third consecutive distribution day, the market was unable to bounce on the heels of two distribution days. Our market timing model has registered a sell signal and for the moment, we are inclined to avoid the long side of the market.

For the past four sessions the ProShares UltraShort Euro ETF (EUO) has been consolidating just above its 20-day and 50-day moving averages. A volume-assisted move above the two-day high of $18.91 could provide a buying opportunity in this inverse ETF.




During the recent market rally the iShares MSCI EAFE Index ETF (EFA) has shown relative weakness as it was unable to even get close to its 200-day MA. EFA is now below support of all of its moving averages. A move below the two-day low of $49.03 could present a short entry trigger for this ETF.



Trading has been difficult lately as the market struggles to find an identity. Although many stocks were showing promise as potential new leaders, the market has lacked follow-through. We are now inclined to look for short entries but will likely look to trade with small size. As of this writing it appears as if the market will gap down sharply on Monday morning. We have no desire to chase the market lower should a big gap down occur.

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.