The recent distribution in the NASDAQ is a concern, and we are beginning to see some leadership stocks break down. That being said, the majority of leadership is still acting fairly well, which leads us to believe that the current pullback in the major averages will be short lived. Market conditions can and do change quickly, so our analysis as always is good for today's report only.

It was a rough day at the office for solar stocks yesterday, producing quite an ugly candle in Guggenheim Solar ETF ($TAN) on heavy volume. Yet, there is support from a short-term trendline and the rising 50-day MA (around $25).

We expect to see some sort of shakeout below the 50-day MA to occur within the next few days, but overall, we would like to see the price action hold above the 10-week moving average on a closing basis (on the weekly chart):



Looking over our current ETF holdings, $SMH, $FCG, and $USO are basically range-bound, while $IHI and $FDN continue to trend higher above the 10-day moving average. $FDN is still trading above the breakout pivot at 49.50, which is also a good sign, as a false breakout from a short-term consolidation in an extended stock or ETF can often lead to a sharp reversal:



The trend is our friend in $FDN, which is still above the 10-day MA. This indicates a high degree of relative strength in this ETF.

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.