Stocks shrugged off early losses to close near session highs on heavier trade. All five major indices closed higher with high beta issues leading the advance. The small-cap Russell 2000 came storming back yesterday to erase virtually all of this week's losses. By the closing bell the Russell had added 1.5%. The S&P MidCap 400 climbed 0.9%, while the Nasdaq posted a 0.8% gain. Both the S&P 500 and the Dow Jones Industrial Average finished higher by 0.4%. The telecommunications and construction sectors were the day's big winners, while airlines and food retailers/wholesalers saw the biggest declines.

Market internals were bullish across the board yesterday. Volume climbed on the Nasdaq by 2.7% and on the NYSE by 5.2%. Advancing volume overpowered declining volume by a ratio of 2.2 to 1 on the NYSE and 2.6 t 1 on the Nasdaq. Yesterday was a big day for market bulls as it was a clear accumulation day. The higher volume suggests institutional investors were active in the market yesterday.

Yesterday, the Market Vectors Pharmaceuticals ETF (PPH) reversed sharply off of its 20-day EMA and is now poised to break out of its recent trading range. A volume propelled move above the February 21st high of $37.20 could provide a buy entry trigger for this ETF. We are placing PPH back on the watchlist. Trade details are provided to our members in the watchlist segment of the newsletter.



The iShares Dow Jones US Basic Materials Sector ETF (IYM) formed a bullish reversal candle yesterday, as it undercut its 10-day and 20-day moving averages but rallied to close near session highs. It is important to note that this price action occurred on higher volume. Reversal candles serve to shake weak hands out of a trade and sweep poorly placed stops. A move above the two day high of $72.82 could provide a buy entry trigger for IYM. We are placing IYM on the watchlist. For our subscribing members, trade details can be found in the watchlist section of the newsletter.



IAU held up well yesterday but did begin to show signs of stalling. A modest pullback would not be unexpected given the speed of the recent advance in this ETF. For the moment, we intend on holding through any pullback. Yesterday's accumulation day bodes well for market bulls. In one session we wiped out almost the entire week's losses and are now poised for another breakout move higher.

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.