Stocks ended the day mixed on light trade. The small-cap Russell 2000 led all of the major indices as it posted a 0.8% gain. The Dow Jones Industrial Average gained 0.6%, while the S&P 500 and S&P MidCap 400 rose by 0.4% and 0.3% respectively. The Nasdaq was Tuesday's sole loser, but APPL's after-hours earnings surprise propelled the Nasdaq futures higher by 1.5%.

For the second time in as many days, internals ended the session mixed. Volume slid 4.9% on the Nasdaq and 3.7% on the NYSE. However, declining volume topped advancing volume by a factor of 1.2 to 1 on the Nasdaq, while advancing volume beat declining volume by a ratio of 2.4 to 1 on the NYSE. Little useful information can be gleaned from yesterday's internals, particularly in light of the Nasdaq Future's big afterhours move.

The S&P Consumer Staples SPDR ETF (XLP) has demonstrated excellent relative strength to the broad market during the most recent correction. Notice that as the S&P 500 has lost support of its 20 and 50-day moving averages, XLP has held support at its 20-day EMA. Further, XLP has spent the last three weeks forming a base. Although XLP does not currently offer a buy entry, with two or three more weeks of basing action, this ETF could become an excellent long opportunity. The ideal price action would involve XLP setting a sequence of lower highs and higher lows over the next several weeks and then forming a reversal candle to provide the ideal "buy pivot".



We're raising our stops in both SOXS and DUST in order to protect gains. Current market conditions demand tight management of all positions. Details of the revised stops are available for subscribers in the "open positions" section of the newsletter. As of this writing, the Nasdaq futures are up by 1.5%. If this gap holds, it could pull all of the major indices back into the middle of their respective trading ranges. Further, this could be a signal that the market is in base building mode and that another rally could potentially be several weeks away.

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.