The market continued its impressive run on Tuesday, as stocks posted strong gains across the board on higher volume. The hourly chart of the S&P 500 tells the story, as the price action has refused to break down below the 20-period EMA since mid-April.



With the market quite extended in the short-term, we would welcome a sharp, one to three day decline to wash out some of the late to the party longs.

After stalling at resistance of the 20-day EMA in late April 1, SPDR Gold Trust ETF ($GLD) broke a short-term support level at 139.50 and is beginning to break down on the hourly chart with lower highs and lower lows in place. The daily chart below shows the declining 20-day EMA around 141.00, which should provide resistance on any bounce.



We have already established a short position in $GLD by going long the leveraged Gold Double Short ETN ($DZZ) on May 1. We are looking for a test of the prior swing high as the target (which is equal to prior swing low in $GLD).

Along with our short in gold, we are currently long ETFs $TAO, $UNG, and $EIDO.

$TAO is in pullback mode the past few days and could present us with a low risk entry to add to the position later this week or early next week. $UNG is trying to bounce after last week's shakeout below the 50-day MA. We may see $UNG settle in to a tight range this week and breakout above this week's high and the 50-day MA next week. $EIDO has yet to extend from the breakout pivot, but the price action has formed a bullish, base on base pattern since the beginning of March and could be ready to breakout later this week.

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.