Following through on the previous day's gains, stocks grinded their way to a higher close yesterday, causing the major indices to close near the middle of their trading ranges of the past several weeks. The S&P 500 Index ($SPX) gained 0.7%, the Dow Jones Industrial Average ($DJIA) 0.6%, and the Nasdaq Composite ($COMPX) 0.5%. The small-cap Russell 2000 Index ($RUT) and S&P Midcap 400 Index ($MID) ascended 0.7% and 0.8% respectively. All the main stock market indexes closed near their intraday highs.

Turnover in the stock market was mixed. Total volume in the NYSE ticked 4% higher, but trade in the Nasdaq was 8% lighter than the previous day's level. The higher volume gain in the NYSE enabled the S&P 500 to register a bullish "accumulation day," which occurs when stocks rise on higher volume. However, it would be better if the Nasdaq's gains also occurred on increasing volume. Although the percentage gains between the NYSE and Nasdaq Composite were similar, the NYSE showed clear bullish divergence in the market internals. In the NYSE, advancing volume trounced declining volume by a ratio of nearly 5 to 1. The Nasdaq ADV/DEC volume ratio was positive by less than 2 to 1.

Recently, we discussed a potential trade setup in Global X Colombia 20 ($GXG), an international ETF that obviously tracks the performance of Colombian stocks. When we first pointed out the potential trade setup last week, we said it may be a little bit too early to enter the trade. However, the price action has tightened up considerably since then, which leads us to believe that a breakout to new "swing highs" will soon occur. On the longer-term weekly chart below, notice that GXG broke out above horizontal price resistance last month, and has been consolidating in a sideways range over the past four weeks. Typically, we like to see ETF price consolidation for at least 2 to 5 weeks before breakout, which increases the odds of the breakout following through to the upside:



Drilling down to the shorter-term daily chart of GXG below, we see that the 20, 50, and 200–day moving averages are all sloping higher and trading above one another. Also, notice that GXG has already formed a significant "higher low." On September 26, GXG gapped down to "undercut" near-term support of its 20-day exponential moving average (the beige line), which absorbed overhead supply by shaking out traders with their entries or protective stops in the wrong place. Then, one day later, GXG immediately snapped back above its 20-day EMA, and has been trading in a very tight, sideways range since then. As such, we now anticipate GXG to soon break out above its trading range over the past several days and surge to a new "swing high." Subscribers to The Wagner Daily swing trading newsletter should note our preset and exact buy trigger, stop, and target prices for this trade setup on ETF Watchlist above.



All four of our existing ETF positions moved higher yesterday, but iShares Philippines Index ($EPHE) is clearly showing the most relative strength of the group. In each of the past three days, EPHE has closed at a new 52-week high. Nevertheless, the broad market continues to show a lack of convincing conviction to the upside. As such, we have raised the stop in EPHE to just below yesterday's low, in order to protect our substantial gain in the event of a pullback. We have also raised the stop in AMLP. As our other ETF positions move higher, we will trail stops to protect gains along the way as well. In the meantime, any new ETF trade entries will be with reduced position size in order to minimize risk. We are also leaning towards ETFs with a low correlation to the direction of the broad market, such as international, currency, commodity, and fixed income ETFs.

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.