Most broad market averages stalled last Friday, after failing to hold a move above the prior day's high and closing near the lows of the day.

Total volume picked up on the Nasdaq Composite, but since the index only dropped by -0.1% it was not an "official" distribution day. That being said, tech stocks failed to move out on higher volume, which is stalling action. It would have been a clear cut day of churning (distribution at the highs) if Friday's close in the Nasdaq was -1.0% or more off the highs of the day (it was only -0.5%):



How the Nasdaq holds up if/when it touches the 10-day MA should tell us whether it is ready to push higher or needs more time to digest the last wave up.

The chart of the S&P 500 ETF ($SPY) below shows a bit of stalling action on Friday. But the stalling was mild compared to last Wednesday's clear cut churning, where the close was about -1.0% off the highs of the day.



The $SPY has not been as strong as the Nasdaq, and could possibly sell off to the 50-day MA, especially if top banking stocks are unable to hold current support levels.

Although most commodity-based ETFs have ripped higher the past few weeks, the Physical Palladium ETF ($PALL) continues to consolidate in a tight range, near its 10-month moving average. The volume has dropped off considerably since 2011, which is a bullish sign overall:



The monthly downtrend line is valid with several touches since 2011. A break of this downtrend line should produce a decent breakout given the length of the consolidation.

We do not mind taking positions prior to a breakout in stocks/ETFs that have been in consolidation mode for 2-6 months. However, when the price action has been consolidating for a year or more we feel it is best to wait for the breakout before getting in.

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.