Stocks sold off in the morning session and (once again) into the close, resulting in losses of roughly 1% or lower in each of the major indices. However, turnover was lighter on both exchanges, so it was technically not a distribution day. Although some leading stocks sold off by 4% or more, we did not see heavy volume technical damage to the charts, which is our main concern when the broad market is in pullback mode.

Taking an updated look at the NASDAQ Composite, a break below the 20-day exponential moving average should lead to a test of the 3,700 level, where there is a significant area of support from the prior highs of the last base, as well as the rising 10-week moving average (or 50-day moving average):



PowerShares Aerospace & Defense ETF ($PPA), which we initially analyzed last week, has pulled back alongside of the major averages, and is now attempting to hold support of its rising 50-day moving average (the prior low-risk buy point two days ago).

After a sharp selloff, it is common to see stocks or ETFs reverse at prior buy points, as many traders set break-even stops once a trade is slightly in their favor. With $PPA, a move above its two-day high and short-term downtrend line (descending black line) could spark some buying interest:



Another ETF we still like for intermediate-term buy entry is iShares Japan Index ($EWJ). After failing to hold near-term support of its 20-day exponential moving average last week, $EWJ pulled back to convergence of its prior downtrend line (new support) and 10-week moving average:



The ETF should hold above this level of convergence (around the $11.50 mark) if it is to move higher over the next few weeks. Otherwise, a breakdown below the 10-week moving average could result in a move to the 40-week MA, around $11.

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.