After two hours of see-saw price action, stocks broke out to new intraday highs across the board just after 12 pm. However, around 12:30 pm, a disappointing earnings report from GOOG which was released ahead of schedule sent the tech giant tumbling 10% lower in short order before trading was halted. The Nasdaq Composite and Nasdaq 100 sold off sharply in reaction and took on water the rest of the session before bouncing off the lows into the close. The S&P 500 was able to shake off the news and return back into the opening hour range as was the Dow. Both the S&P Midcap 400 Index and Dow Jones Industrial Average ($DJIA) held up the best only giving back 0.1%. The S&P 500 Index ($SPX) shed 0.2%. The small-cap Russell 2000 Index ($RUT) lost 0.6%, while the Nasdaq Composite dropped 1.0%.

Earlier this week we posted a chart of CurrencyShares Euro Trust ($FXE), showing a bullish consolidation above the 200-day moving average. The weekly chart below shows the break of a year long downtrend line on a pick up in volume. With the strong move off the lows, the price action should continue to consolidate in a tight range and ideally not retrace more than 38% of the move measured from 7/27 to 9/14. Currently the lows of the consolidation is only 33% off the highs of the move.



We are monitoring $FXE for a low risk entry point on a pullback, especially if the price action can test the rising 20-day EMA and form a higher low. The action doesn't have to pullback and could just drift sideways for a day or two before breaking out above the 10/17 high.



Global X Silver Miners ETF ($SIL) has held up well the past two weeks and is forming a tight-ranged consolidation near the highs of the last move. $SIL exploded off the lows of August before stalling at resistance from the highs of late February 2012. The powerful trend reversing move was confirmed by a bullish moving average crossover as well, as the 50-day MA is now above the 200-day MA and both averages are pointing in the right direction.



The Nasdaq's performance on Thursday clearly shows that the market is fragmented. We can't expect much from the S&P 500 if the Nasdaq is not on board. Over the past few weeks two key Nasdaq leadership stocks, GOOG and AAPL, have broken down below the 50-day MA. These leaders are being replaced this week by insurance and utility stocks....this is not the type of rotation that inspires confidence.

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.