After trading slightly lower and in a tight, sideways range throughout the first half of the day, stocks staged a rally attempt just after mid-day, but the buying interest was short-lived and the broad market drifted back down. The Nasdaq Composite dipped just 0.1%, but turnover in the exchange ticked 5% higher. Although the Nasdaq's loss was not enough to count as a "distribution day," the session was definitely indicative of bearish churning (stealth institutional selling into strength). The S&P 500 lost 0.4%, but on volume that was a bit lower than the previous day's level.

Because the broad market rallied in the early afternoon, but failed to hold onto those intraday gains into the close, several of the major indices formed a candlestick pattern known as a shooting star, a bearish reversal pattern that often precedes a near-term correction within an uptrend.

Below, we have highlighted the shooting star candlestick that formed on the daily chart of PowerShares QQQ Trust ($QQQ), a popular ETF proxy for the Nasdaq 100 Index:



The combination of the Nasdaq registering a (modest) loss on higher volume and the formation of the shooting star candlestick means the index may be setting up for a near-term correction (either pullback or consolidation). Since the Nasdaq has shown relative strength and led the rest of the major indices higher on this most recent leg of the uptrend, the rest of the major stock indexes would likely follow suit. BUT, this is not a bad thing.

Even though we are currently positioned on the long side of the market, we would actually welcome a healthy short-term correction because the major indices have become rather extended away from near-term support levels. If the extension becomes too great, the odds of a more significant correction increase. Therefore, an orderly correction from here would enable stocks to catch their breath and build new bases of consolidation from which to stage their next legs up. Furthermore, either a correction by price (pullback) or correction by time (consolidation) could give us some low-risk entry points on a few strong ETFs we have been internally monitoring, but have avoided buying due to unfavorable reward-risk ratios.

Because Market Vectors Semiconductor ETF ($SMH) is already nearing its target and is now showing an unrealized gain that is more than two times the amount of our initial risk, we are squeezing the stop even tighter going into today's session. Subscribing members of our ETF and stock trading newsletter should note our exact, updated stop price in the "Open Positions" section of today's report.

US Natural Gas Fund ($UNG) had a nasty shakeout after yesterday morning's weekly inventory report, but it quickly snapped back. Undercutting the prior swing low of April 4 by a few cents, $UNG missed our stop and then quickly reversed back into the prior day's range. That shakeout could be what was needed in order for $UNG to start moving higher again. With 3 consecutive days below the 50-day moving average, it really needs to get back above it again within the next day or two. As for our other two open ETF positions ($EIDO and $TAO), we intend to hold both of them through the anticipated near-term pullback in the market.

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.