iShares MSCI Japan Index ($EWJ) has been in rally mode since putting in a nasty "shakeout" candle on August 30, when the price action gapped below support for a day and immediately gapped back above the next.

Within two weeks, $EWJ was back above support of its 10-week moving average, and the very next week it broke out above the downtrend line on the weekly chart below:



A few weeks of tight price action in $EWJ would be quite constructive here. Ideally, we would like to see a two to four week consolidation, with the price action holding above the 10-week moving average (around $11.50).

On the longer-term monthly chart of $EWJ, we see a clear resistance level just above $14. This is where we would look to exit $EWJ into strength if we were long. Currently, there is no low-risk setup in place, but we will continue to monitor the action for a possible buy entry with a positive reward-risk ratio:



At the beginning of 2013, the S&P 500 had lots of help from strengthening industry sectors. But over the past few months, participation has declined, starting with a bearish trend reversal in REITs and relative weakness in homebuilders and financials. Unless the energy sector can pick up the slack, it may be tough for the S&P 500 to catch up to the NASDAQ anytime soon.

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.