Equities posted small to modest gains yesterday on light trade. The DJIA, S&P 500 and Nasdaq all set three month highs however. All five major indices closed up on the day. The Nasdaq and the small-cap Russell 2000 showed the most strength yesterday, as both tacked on 0.7%. The S&P MidCap 400 posted a 0.5% gain, while both the Dow Jones Industrial Average and the S&P 500 struggled to close 0.2% higher.

Market internals closed mixed for a second consecutive day. Turnover slid across the board. The NYSE saw trade drop by 15.2% and the Nasdaq by 11.8%. Advancing volume once again held the upper hand on Monday. The spread ratio ended the session at a plus 2.0 to 1 on the NYSE and a plus 3.5 to 1 on the Nasdaq. However, institutional players appeared to have little interest in buying stocks, as evidenced by yesterday's light volume.

The iShares MSCI Mexico Investable Market ETF (EWW) has shown excellent relative strength since gapping up in June of this year. During this time it has been consolidating along its 20-day EMA, as it has set a sequence of higher-lows. EWW offers a potential buy entry on a pullback and undercut of its 10-day or 20-day moving average. As always, we will be watching for the formation of a reversal candle as the pivot for a potential buy entry.



The S&P MidCap 400 and the small-cap Russell 2000 continue to lag the other indices. Neither index has been able to crack their most recent swing highs and still remain well below their three month highs. This lack of price confirmation, combined with weak volume in the broad market over the past two sessions, suggests that we should remain cautious with respect to entering new positions. For this reason, we have been quite particular with respect to the trades that we enter. There are times when it pays to be cautious and when your focus should be on preserving capital. Trading is fun, but we don't trade for enjoyment. We trade to make money. This market has had a penchant for retracing its steps significantly since early June of this year.

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.