Stocks lost ground last Friday, as volume edged higher as well. The major indices all fell more than one percent, with the higher beta exchanges leading the decline. The small-cap Russell 2000 and Nasdaq Composite both plunged 1.5%, while the S&P MIdCap 400 and the S&P 500 both slid by 1.3%. The Dow Jones Industrial Average showed the most resiliency, but still closed lower by 1.1%.

Market internals were bearish on Friday. Volume ticked up on both the NYSE and Nasdaq by 0.75%. Further, declining volume topped advancing volume by 6 to 1 on both exchanges. The decline in price action accompanied by higher volume and higher declining volume suggests that institutions continue to place selling pressure on the market.

Over the past two sessions, the S&P Select Materials SPDR Fund (XLB) has found resistance at its declining 20-day EMA. XLB also has considerable resistance at $36.30. As such, a move below the April 13 low of $36.10 could present a short selling opportunity in this ETF.



On April 4th, the S&P Select Industrial SPDR Fund (XLI) lost support of its 20-day EMA and 50-day MA. Since then, XLI set a lower low on April 10th. XLI now faces resistance at its 20 and 50 day moving averages and offers a possible short entry on a bounce into these key marks, or on a move below last Friday's low of $36.32. We will be monitoring XLI closely for a possible short sale entry, and will send an Intraday Trade Alert to subscribers of The Wagner Daily if we enter the trade.



With last Friday's distribution day, the market appears to have more downside potential. The Nasdaq is now the only one of the five major indices still holding support of its 50-day MA. In contrast, the Russell 2000, S&P 500, S&P MidCap 400 and DJIA all face new resistance (which was previously support) at this key level of intermediate-term trend. Given the recent distribution in the broad market, at a minimum, it appears that several weeks of sideways action may be needed to repair the recent damage.

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.