Holding onto the gains of the previous day's rally, stocks concluded the week on a positive note. The Nasdaq Composite gained 0.5%, while both the S&P 500 Index and Dow Jones Industrial Average rose 0.2%. One of the most positive aspects of last Friday's session was another display of relative strength in the small-cap Russell 2000 Index, which tacked on 0.8%. The S&P MidCap 400 Index advanced 0.5%. Although stocks traded in a relatively narrow range throughout the day, all the main stock market indexes closed near their intraday highs.

Total volume in the NYSE was 9% greater than the previous day's level, but turnover in the Nasdaq eased 16%. Given that the Nasdaq showed relative strength to the S&P and Dow last Friday, it would have been better if volume levels in the Nasdaq were a bit higher. Furthermore, considering that last Friday was also monthly options expiration, a day which normally sees greater stock market volume to begin with, it would be fair to say that the overall pace of trading last Friday was quite light. As is common in the summer doldrums, total volume levels in both exchanges were lighter than average. In fact, it has been 11 days since turnover in the NYSE even exceeded its 50-day average level. Until we see the return of institutional trading activity, probably sometime early next month, we expect momentum in the markets to be subdued.

Since selling off to "undercut" support of its 50-day moving average two weeks ago, the inversely correlated ProShares UltraShort Euro ($EUO) has been trading in a tightening, sideways range, holding above support of its primary uptrend line and 50-day moving average. As the daily chart below illustrates, the primary uptrend has been in place for many months, while $EUO has been in a four-week retracement off its July high:



This type of chart pattern shown above is normal and healthy, and is indicative of what a steadily uptrending stock or ETF typically looks like. Whenever one trendline is moving in one direction (the dashed blue line) and another trendline is moving in the opposite direction (the dotted red line), the longer-term trendline typically wins out. This is why we always say that the longer a trendline has been in place, the more likely the trend will remain intact. In this case, odds favor a resumption of the dominant uptrend in $EUO. Further, because this is a Pullback entry, the reward to risk ratio of the trade setup is favorable. For this pullback entry on our watchlist, regular subscribers of our Wagner Daily swing trading newsletter should note our exact entry, trigger, and stop prices for the technical trade setup.

Going into today's session, keep a close eye on the performance of $QQQ, which tracks the performance of the Nasdaq 100 Index. Last Friday's gain put $QQQ within close striking distance of testing major resistance of its late March/early April highs. This does not mean we should suddenly be selling our long positions (since our market timing model is now in a "buy mode"), but a pullback as the index runs into this resistance level would not be surprising. We will possibly analyze $QQQ in our technical ETF commentary later this week, depending on its price action over the next few days.

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.