Stocks appeared to be following through on last Friday's weakness, with most averages down 1.0% or more by 11:30 am. However, stocks found traction during the lunchtime doldrums and surged higher in the final hour of trading, sending most averages into positive territory by the close (the S&P Midcap 400 was the lone holdout). The afternoon reversal was impressive, as the Nasdaq climbed almost 1.5% off the lows of the day by the close.

Volume confirmed yesterday's price action, as turnover increased on both exchanges. NYSE volume was less than 1% higher, but Nasdaq volume increased by 6%. The positive close on higher volume produced a much needed accumulation day for both the Nasdaq and S&P 500.

After undercutting Friday's low and the 20-day EMA, S&P 500 ETF ($SPY) rallied to close above the 20-day EMA and the prior swing low on May 23.



Small cap stocks continue to show relative strength, as $IWM has yet to close below the 20-day EMA or break the prior swing low from May 23.



Financials continue to act well, and that is a bullish sign for the market. The weekly chart of Financial Select Sector SPDR ($XLF) is consolidating in a tight range at the highs the past few weeks, well above the rising 10-week MA. The financials have been in good shape all year, breaking out from two bullish basing patterns (one in January, the other in May).



Confirming the strength in $XLF is the recent breakout in the iShares Dow Jones US Broker-Dealers ($IAI).



Look for $IAI to sit in a tight range above $29. The rising 10-week MA is the line in the sand for the setup to remain bullish.

United States Natural Gas Fund ($UNG) is still holding above the prior swing low on the weekly chart below. $UNG must break the downtrend line of the current consolidation before the uptrend can resume.



$UNG is attempting to reverse and ugly four year downtrend, as evidenced by the recent bullish crossover on the weekly chart. The 10-week MA crossed back above the 40-week MA in March.

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.