Stocks gapped down yesterday but closed well off session lows on light trade. All five major indices ended the session in the red. The small-cap Russell 2000 led the decline, as it fell 1.5%. The S&P MidCap 400 slid 1.1% while the Nasdaq posted a 1.0% loss. Both the S&P 500 and the Dow Jones Industrial Average fell 0.8% on the session. With the exception of the Nasdaq, all of the major indices managed to hold their recent swing lows (April 10th swing lows).

Market internals were mixed on Monday. Volume fell on the Nasdaq by 7.2% and on the NYSE by 19.7%. Declining volume overpowered advancing volume by a ratio of 5.5 to 1 on the NYSE and 4.7 to 1 on the Nasdaq. Due to the light volume, both exchanges avoided a distribution day.

Over the past several weeks, the Market Vectors Vietnam ETF (VNM) has demonstrated excellent relative strength, as it has been one of the few ETFs to hold support of its 20-day EMA during the recent round of selling pressure. Yesterday, VNM undercut, but managed to reclaim support of its 20-day EMA. If VNM can form a reversal candle or post an "inside day", it could present a possible buying opportunity particularly if the market finds support at the current levels.



Yesterday, on an uptick in volume, the Direxion Financial Bear 3x Shares (FAZ) gapped up but found resistance at its 50-day MA. A move above yesterday's high of $23.44 could provide a buy entry trigger for this ETF. FAZ offers a more conservative buy entry point over the April 10th high of $23.78.



Our four open swing short positions (including two inverse ETFs) are each now showing a solid unrealized gain ($DUST, $SOXS, XLNX, and ORCL), aided by the Nasdaq losing key support of the 2,976 level yesterday. Regular subscribers should note our updated stop and target prices in the "open positions" section of this newsletter. It now appears likely that the tech-rich index may need to build a base if it is to move to higher ground. If the S&P 500 loses its April 10th swing low of 1,357, the broad market could easily see a more protracted sell-off.

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.