Stocks finally stabilized on Tuesday, with all broad market averages closing in positive territory, led by a 0.9% gain in the small and mid-cap averages. Although the market moved higher, the action didn't pack much of a punch, as the S&P 500 and Dow Jones failed to clear the high of Monday's narrow bar. Volume was as light as well, so not much to get excited about for the bulls.

All major averages except for the Nasdaq Composite are still below their 50-day moving averages. However, all averages are still trading above the last major swing low, so the uptrend (in our opinion) is still intact. See this recent analysis for more details.

The daily chart below clearly shows that the NASDAQ Composite is in much better shape than the S&P 500.



The NASDAQ is closer to overhead resistance, so it will not have to cover as much ground to clear resistance. The uptrend remains in decent shape.

The 50-day MA has held up, and the action is still well above the last major swing low. The 20-day EMA is beginning to turn down and will offer some resistance, but is not in danger of crossing below the 50-day MA yet.

The S&P 500 has obviously cracked the 50-day MA, and has pulled back to support of the last major swing low. Note that the 20-day EMA has turned down and is close to crossing below the 50-day MA, which would signal that the uptrend needs a few weeks of rest (at the very least).

Because the selloff was so sharp, $SPY will have to waste quite of bit of energy just to rally up to major resistance at the $181 - $182 level (if it can get there).



As mentioned yesterday, aside form a potential pullback entry in the Natural Gas ETF ($UNG), we are not looking to initiate new long positions in the ETF portfolio. We continue holding a few winning positions that could run higher if the market is able to recover.

It is still too early to go short, but if the S&P 500 fails to return back above the 50-day MA and sets a lower high and a lower low, then the short side will be in play.

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.