Since recovering off their June 24 lows, the main stock market indexes have been trending steadily higher. For the past several days, all the major indices have been holding firmly above key intermediate term support of their 50-day moving averages as well. However, the S&P, Dow, and NASDAQ may now pause for several days, or pullback slightly, as each index has run into significant horizontal price resistance.

Below are daily charts of the ETF proxies of three popular indexes. Notice the similarities in their chart patterns right now:







As pointed out in our July 8 report, one really positive element of the market right now is the leadership being exhibited by small-cap stocks.

In each of the past four sessions, the small-cap Russell 2000 Index has closed at a fresh all-time high. Again, this is a bullish sign of an increasing appetite for risk among institutional investors. Even though the S&P, Dow, and NASDAQ are still below their prior highs (and at resistance levels), any correction in the broad market is likely to be short-lived due to the leadership in the small-cap arena.



Presently, we have three open ETF positions in the model portfolio of The Wagner Daily newsletter, each of which is showing an unrealized gain since entry. Here is a quick update on the technical picture of each one.

The recent breakout in US Oil Fund ($USO) has been following through nicely. The ETF has closed higher and six out of the past seven sessions. $USO also jumped 1.8% yesterday, despite an unchanged closing price in the benchmark S&P 500. Trading at a new 52-week high, this ETF continues to act very well.

Like $IWM and the Russell 2000, First Trust DJ Internet Index ($FDN) has set a new all-time closing high in each of the past three sessions. Internets are one of the strongest industry sectors right now, and we are well-positioned to take advantage of further gains in the sector. Even if the broad market pulls back for a few days, we expect $FDN to hold above its breakout level, then resume its upward march shortly thereafter.

Guggenheim Solar ETF ($TAN) has been consolidating for the past several days, but remains above new support of its prior downtrend line. It is also holding above its 20 and 50-day moving averages, both of which are sloping higher. Remember that $TAN was one of the strongest domestic ETFs in the market prior to the recent correction.

As market conditions continue to improve, we plan to add additional stock and ETF exposure to our portfolio.

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.