Following a morning gap down, stocks fought back to end the session mixed. Trade was also mixed. As has been common in recent sessions, the Dow Jones Industrial Average exhibited the most relative strength, as institutions continue to have an appetite for large cap, dividend paying stocks. The Blue Chip Index ended the session up by 0.2%. The S&P 500 closed fractionally higher, while the Nasdaq ended the day just below the break even mark. Smaller cap issues continued to struggle as the S&P MidCap 4000 and the Russell 2000 slid 0.3% and 0.7% respectively. For the most part, stocks were in consolidation mode on Wednesday.

Market internals also ended mixed on Wednesday. Volume edged higher by 1.8% on the Nasdaq but slid 8.7% on the Big Board. Advancing volume finished the day at par with declining volume on the NYSE but outpaced declining volume on the Nasdaq by a ratio of 1.4 to 1. The Nasdaq just missed posting another accumulation day as it was unable to climb back to positive territory. The light volume on the NYSE eliminated any possibility for back to back accumulation days.

Yesterday, on an uptick in volume, the Direxion Daily Gold Miners 3x Bear ETF (DUST) tested support at the 50-day MA, but then reversed to close in the upper third of the day's trading range. Ideally, we would like to see an inside candle form prior to DUST attempting a possible move higher. As an alternative, an undercut of the 50-day MA and the formation of another reversal candle would also provide a potential long setup for this ETF. The entry under either of these scenarios would be a move above yesterday's high of $37.76.



Over the past three sessions, the iPath DJ-AIG Livestock Total Return Sub-Index ETN (COW) has attempted to rally back above its 20-day EMA to not avail. Each time it has tried to reclaim this key mark, COW as been met with selling pressure, and has closed near session lows. A move below the three-day low of $29.74 could present a shorting opportunity in this ETF. We are placing COW on the watchlist. Trade details are posted in the watchlist segment of the newsletter.



Overall, we would rate Wednesday's price action as positive for bulls. In the wake of Tuesday's big advance, a day of consolidation should be expected prior to the market attempting another move higher. The fact that stocks gapped down, tested key support levels, and closed near session highs, has provided further evidence that bulls may be wrestling control of the market.

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.