Stocks continued their recent losing streak, as they posted their fourth consecutive losing session yesterday. Trade was mixed. Despite another weak day on Wall Street, the major indices managed to close off session lows. The Dow Jones Industrial Average and the S&P 500 dropped 0.7% and 0.8% respectively. S&P MidCap 400 continues to show relative weakness, as it fell 0.6% and closed below its 200-day MA for the first time in since July 25th. The the tech-heavy Nasdaq slid 0.4% on higher trade. Although the small-cap Russell 2000 fell the least on Thursday, it has demonstrated the most relative weakness over the past several weeks. The Russell is the only index within mere points of breaking below its July 24th swing low.

Yesterday was the Nasdaq's turn to post a distribution day. Volume increased by 6.2% on the Nasdaq, while declining volume topped advancing volume by 2.0 to 1 on this index. Turnover on the NYSE fell by 5.2%, but the lighter volume was not surprising, given Wednesday's high volume due to the Knight Capital Debacle. Declining volume topped advancing volume on the Big Board by 3.7 to 1.

On a pop in volume, the SPDR S&P Metals and Mining ETF (XME) formed a bearish reversal candle as it tested its two day high, but weakened dramatically to close near session lows. A drop below yesterday's low of $38.55 could provide a short entry trigger for this ETF. We are placing XME on the watchlist. Trade details are available to our clients in the watchlist section of the Newsletter. For those of you trading qualified accounts, the Direxion Daily Gold Miners 3x Bear ETF (DUST) would serve as a reasonable, although not precise, proxy to XME. DUST is not an official trade.



The Powershares DB US Dollar Bull ETF (UUP) has been in an uptrend for several months and is now consolidating near its 20-day and 50-day moving averages. This ETF could provide a buying opportunity on a pullback and undercut of its 50-day MA. The chart below provides the ideal price action that we would like to see in order to enter UUP on the long side. We will continue to monitor this ETF for a potential long entry.

 

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.