Stocks back peddled on Wednesday on mixed trade. After recovering from an opening gap down, stocks rallied and appeared to be gaining some traction. However, sellers stepped into the market late in the session and drove stocks lower. All five of the major indices ended the day in the bottom third of their respective intraday ranges. The S&P MidCap 400 dropped 1.4%, as it undercut the low of the five day trading range. The mid-cap index now appears headed for a retest of its June 4th swing low. The small-cap Russell 2000 is also in danger of losing support of its five day trading range low. A move below 748 could place this index under serious pressure. The Nasdaq, S&P 500 and Dow Jones Industrial Average tumbled 1.0%, 0.7% and 0.6% respectively.

ProShares UltraShort Oil and Gas ETF (DUG) formed a bullish reversal candle yesterday, as it undercut its 20-day MA but then rallied to close near session highs. Also, DUG formed the reversal candle on an uptick in volume. A move above the June 8th high could provide a buy entry trigger for this inverse ETF. Trade details are posted in the watchlist segment of the newsletter.



Over the past week, the S&P MidCap 400 has shown relative weakness to the other major indices. Yesterday, this index was the only one of the five to momentarily lose support of its five day low. By extension, the Direxion Mid Cap Bear 3x ETF (MWN) has shown relative strength to the other inverse ETF indices. A move above the five day high of $26.37 could provide a buy entry trigger for this inverse ETF. We are placing MWN on the watchlist. You will find trade details for MWN in the watchlist section of the newsletter.

 

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.