In the July 30 issue of The Wagner Daily, we said, "The First Trust ISE Revere Natural Gas ETF ($FCG) hasn't done much at all this year but chop around in a tight range. However, looking at the monthly chart, we see that the current consolidation is just below the monthly downtrend line." Here was the chart we showed at the time:



Yesterday, after gaining 0.6%, $FCG is now within striking distance of breaking out above its high of the past several weeks. If it does, we plan to buy it in anticipation of bullish momentum carrying it substantially higher in the near-term. The first buy will be on reduced share size, as we wait for confirmation in the form of a weekly breakout to add to the position.

Unlike $USO, which is a commodity ETF that tracks the price of crude oil, note that $FCG is NOT actually a commodity ETF. Rather than tracking the price of natural gas, it tracks the price of a basket of individual stocks related to the natural gas industry.

Although our ETF and stock picking strategy is based on the performance of leading individual stocks and ETFs, rather than the broad market, we like to keep an eye on the chart patterns of the major indices because they are commonly followed by the general public.

If an index such as the Dow Jones bumps into a resistance level, it sometimes causes temporary selling pressure on the broad market because investors and traders see that resistance and sell into it. In this regard, the support or resistance levels of the major indices often become a self-fulfilling prophecy.

Right now, the charts of two very popular indexes, the S&P 500 and NASDAQ 100, or at pivotal "make it or break it" levels that could have a significant impact on the near-term direction and momentum of the broad market.

Below are daily charts of the S&P 500 SPDR ($SPY) and PowerShares QQQ Trust ($QQQ), two popular ETF proxies that track the S&P 500 Index and Nasdaq 100 Index respectively. Notice how both indexes are toying with pivotal resistance levels of their recent highs:





Again, to reiterate, we will continue to manage our existing positions and enter new positions based on individual price action, rather than whether or not the major indices break out from here. Nevertheless, it's always a good idea to keep an eye on the "big picture" of what's going on in the market because of the self-fulfilling prophecy effect we mentioned earlier.

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.