Stocks continued their upward surge on Friday, on strong trade. All five major indices closed more than two percent higher. High beta issues led the charge with the Nasdaq, small-cap Russell 2000 and S&P MidCap 400 posting gains of 3.0%, 2.9% and 2.8% respectively. The S&P 500 tacked on 2.5% while the Dow Jones Industrial Average improved by 2.2%.

Market internals were decidedly bullish yesterday. Volume rose on the NYSE by 17.2% and on the Nasdaq by 8.6%. Advancing volume overpowered declining volume by a ratio of 7.8 to 1 on the NYSE and by a ratio of 5.4 to 1 on the Nasdaq. Yesterday's heavy volume points to institutional accumulation across both exchanges. Friday was a decisive accumulation day on both the NYSE and the Nasdaq. It was also a bullish follow through day on both exchanges.

During the recent pullback in the market, the Market Vectors Retail ETF (RTH) showed relative strength, as it held support just below its 20-day and 50-day moving averages, while the broad market undercut the 200-day MA. RTH could provide a buying opportunity either on a pullback toward the gap formed on Friday, or if it consolidates for several days to several weeks near the April 27th and June 19th swing highs ($42.71 and $42.50).



We exited all of our ETF positions at the open on Friday. When the market reverses as it did on big volume, it is critical to act decisively and close all short positions. This holds particularly true when dealing with leveraged, inverse ETFs. We now have a confirmed buy signal in the market and our efforts will be focused on identifying long entries on pullbacks in the market.

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.