Stocks reversed lower on a pick up in volume, creating ugly reversal candles in the Dow Jones, S&P 500, Russell 2000, and S&P Midcap 400.

The S&P 500 reversed lower on higher volume, producing a distribution day.




After gapping lower on the open, $SPY rallied above the prior day's high and failed to hold, selling off to new lows on the day in the afternoon.

$SPY has support around $181, where the 10, 20, and 50-day are clustered together.

The Nasdaq Composite also produced a distribution day, selling off -0.8% on higher volume and closing back below the prior swing high. The Nasdaq 100 ETF ($QQQ) is relatively strong, as is still trading above the prior swing high.



With the prior swing high and the rising 10-day MA, there should be decent support around the $85.50 to $89 level.

Given the sharp rally off the lows in the market, a few days of consolidation would be welcomed here, as our scans have not produced much in the way of new buy entries the past few days. The market timing model remains in buy mode, and leadership stocks continue to hold up well.

Financials continue to struggle, as Financial ETF ($XLF) cracked the 50-day MA on a pick up in volume after a light volume rally into the 50-day MA. Note the bearish reversal candle on higher volume below.



If $XLF can't hold the 50-day MA, then we'd like to see the action hold $21. If support doesn't hold at $21, look for a potential test of the 200-day MA.

After a 20% rally from our entry point, we are selling $JO at market on Thursday's open to lock in gains.



On the stock side, we have no new buy setups today. $TSLA (one of our current positions) eported earnings after the close, and rallied about 25 points off Wednesday's close in after hours trading. This means we will be showing an unrealized gain of nearly 50% tomorrow.

$SCTY also rallied about 2 points from Wednesday's close in after hours trading. While Elon Musk had a bad day during market hours, the after hours session was quite kind! :)

Our scans have dried up a bit this week, so a few days of sideways action in the market should produce new buy setups.

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.