Stocks moved higher on Friday but on extremely light volume. All five major indices closed in the black, with large-cap issues leading the advance. Twenty-eight of the thirty DJIA issues closed higher. By the closing bell the Dow Jones Industrial Average had tacked on 1.0%, while the S&P 500 added 0.9%. The Nasdaq managed a 0.7% advance, as the S&P MidCap 400 and the small-cap Russell 2000 improved by 0.6% and 0.3% respectively.

Market internals closed mixed for a third straight day. Turnover was down sharply across the board. On the Nasdaq volume plunged by nearly 36.0% and on the NYSE it dropped 33.2%. Advancing volume outpaced decling volume by a factor of 3.7 to 1 on the NYSE and 2.1 to 1 on the Nasdaq. As is typical for a pre-holiday session, institutional players were absent from the market, as evidenced by the meager volume.

Since finding a bottom on December 14, the ELEMENTS Rogers International Commodity Agriculture ETN (RJA) has rallied back into resistance of its 20-day and 50-day moving averages. RJA could offer a potential short setup if it forms a reversal candle at the current level, or on a breakdown below the two-day low of $8.64. We are monitoring this ETF carefully for a possible short entry.



Over the past five sessions the Market Vectors Oil Services ETF (OIH) has rallied back into resistance of its 20-day EMA. A move above this key mark followed by a sharp reversal could provide a shorting opportunity in this ETF. Ideally, we will be looking for a reversal candle to form similar to the one described for RJA.



The ProShares UltraShort EURO ETF (EUO) has been consolidating in a tight bullish pennant-like formation over the past eight sessions. This ETF now appears ready to break out to new highs. A move above the three-day high of $20.07 should provide a buying opportunity in this ETF. We would also consider adding to EUO above $20.21 and the recent swing high of $20.32. We are placing EUO on the watchlist. Trade details are provided for our subscribers in the watchlist segment of the newsletter.



Friday's pre-holiday session was unimpressive as stocks moved lethargically higher on light volume. ZSL appears primed to break to new highs, as its price action continues to tighten. We may consider adding to our ZSL position above the two-day high. We remain cautious about the market but feel reasonably confident with our current open 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.