SPDR S&P Pharmaceuticals ($XPH) has been leading the market higher all year. So far, little has changed because $XPH continues to trend higher above its 50-day moving average.

The price has lost a bit of momentum over the past few weeks, as $XPH looks to be forming a late stage base at the highs.

A late-stage base is one that can easily move higher because there is so much momentum on the weekly and daily charts. However, this sort of base is better suited for the agile swing trader, rather than intermediate-term position trader, because the trend might not have much left in the tank.

$XPH may need another week or two of consolidation around $78 (due to last Friday's false breakout attempt). We typically see false breakouts pullback for three to five days before reversing higher, but if the market retraces off the highs, we could see a deeper pullback to the 50-day moving average (around $77):



As initially discussed in our August 23 commentary, we continue to monitor for a potential, low-risk short entry into iShares Dow Jones US Real Estate ($IYR).

The nasty breakdown on big volume in May and June was the first major sign that the real estate sector was in big trouble.

The bounce off the lows in July that stalled at the declining 10-week moving average produced a lower high, which was another clue.

The following selloff in August broke below the prior swing low, signaling that a potential trend reversal was under way.

A rally or over-cut of the 40-week moving average (in orange) should provide an excellent short selling opportunity, as the price action should not climb back above the "lower highs" established in July.

Please note this setup is not actionable right now, but it's worthy of putting on your radar screen:



Overall, our ETF and stock scans have not turned up much in the way of actionable buy setups over the past few days. This makes sense because most averages are overbought in the short-term and could use a week or two of consolidation.

Still, as we have been seeing all year, overbought averages can continue to push higher longer than anyone expects. Therefore, our focus remains on the price and volume patterns of individual stocks and ETFs, not on the major averages (after the market is already in trend mode).

The general short-term plan is to remain patient and wait for new buy setups to emerge. With the market extended in the short-term, it is important for traders to maintain discipline and avoid chasing buy entries.

Chasing entries all over the place can lead to ugly losses in a hurry if one is too aggressive at the wrong time. As always, focus on individual setups and not the market.

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.