Stocks finished modestly higher for a second consecutive day, on mixed trade. The small-cap Russell 2000 led the advance, as it posted a 1.5% gain. The S&P MidCap 400 and the S&P 500 added 0.9%, while both the Nasdaq and the Dow Jones Industrial Average tacked on 0.7%.

Over the past three sessions, the ProShares UltraShort Basic Materials ETF (SMN) has pulled back to, and held support of its 200-day moving average. This inverse ETF could provide a buying opportunity if it forms a reversal candle (see blue candlestick) on an undercut of the 200-day and/or 20-day moving averages. A move above the high of the reversal candle would then provide a perfect buy entry trigger. We will be monitoring SMN closely for a potential buy entry.



Yesterday, DUST hit its trigger and we entered the trade. Despite the rally in the market, UUP remained strong and closed slightly higher on the day. Both MZZ and FXP pulled back for a second consecutive day, but are now at support of their respective 20-day EMAs.

Given the lack of conviction in the market, we are not inclined to open any new positions without first booking profits from our open trades. It makes little sense to take on additional exposure until the positions we are in prove profitable. The price action on the Nasdaq has been subtle over the past two days, but given that it has come in the form of back to back accumulation days, it's difficult to ignore the possibility that a buy signal could be in sight. The price action on the Nasdaq has been subtle over the past two days. Although the buying action has not been particularly powerful, it has come in the form of back to back accumulation days. It's difficult to ignore the possibility that a buy signal could be near, when this type of price action occurs.

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.