Stock got hammered on Thursday, marking the fourth consecutive day of declines. All five major indices lost more than 1.0%. The S&P MidCap 400 led the decline as it plummeted 2.5%. The small-cap Russell 2000 dropped 2.3%, while the Nasdaq slid 2.1%. The Dow Jones Industrial Average and the S&P 500 fared slightly better as they gave back 1.2% and 1.5% respectively. Only six of the 105 sectors that we track closed higher on the day. Only precious metals and gold miners managed to finish higher by a significant amount.

For a third time in as many days, market internals were bearish. Yesterday's price action was particularly negative as all of the major indices opened at session highs and closed at session lows. There was virtually no reprieve from the selling pressure throughout the day. Volume spiked by 5.2% on the Nasdaq and by 8.6% on the Nasdaq. Declining volume overwhelmed advancing volume by a margin of 7.7 to 1 on the NYSE and 6.0 to 1 on the Nasdaq. Clearly, institutions were dumping stocks.

We closed our long position in $SOXS yesterday, locking in a nice 12.0% gain on a hold time of just a few days. TZA, which we also recently bought in the model portfolio of The Wagner Dailyswing trading newsletter, rocketed higher and we are now over 7% in the money on this trade. $RTH triggered yesterday, so we entered a short position in this ETF, which went on to close at the dead lows of the session. $XLY short also triggered our entry price yesterday and sold off sharply throughout the day. By the close, we were up 2.4% in this ETF. We will be looking to take profits today as we are both tightening stops and adjusting targets. Now is not a time to get greedy in the markets; rather, it is time to take profits. If you missed this move lower, we caution against chasing the market.

Since March of this year, the ProShares UltraShort Silver ETF (ZSL) has reversed its downtrend and reclaimed the 20-day, 50-day and 200-day moving averages. A pullback to and undercut of the 200-day MA could present a buying opportunity for this ETF.



Thursday was a difficult day for Wall Street. Until yesterday, for the most part, the major indices were grinding lower but showing few signs for panic or fear. Yesterday's onslaught changed all of that. We witnessed the first signs that the market may be approaching capitulation. In order for a market to recover from a bearish trend, selling pressure must overwhelm the market on a big spike in volume. Only when bulls are completely washed from the market can a reversal occur. However, for the moment, we remain bearish on the market and will continue to look for shorting opportunities into any bounces until our market timing model provides a buy signal.

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.