After breaking support at $31, iPATH Livestock ETF ($COW) found support on a test of the backside downtrend line, just above the prior swing low.

$COW closed off the lows of the session, but will have quite a bit of overhead now at $31 with the 10 and 20-day MAs pointing lower, and the 50-day MA turning down.



Commodity ETN iPATH Coffee ($JO) put in a bullish reversal candle on Wednesday, which could end the current 5-week slide off the highs.

Since $JO failed to breakout in late April, it must now form a quality basing pattern which is usually at least eight weeks in length.



$JO is not actionable right now, but if the reversal candle holds and the price action follows through above the downtrend line, then we will look for a pullback entry within the next week or two.

There was some stalling action in the S&P 500 yesterday, as it tested the prior day's high, then followed with a reversal lower into the close. Although the S&P 500 only gave back -0.1%, it did close in the bottom half of the day's range, and on higher volume. It wasn't a clear distribution day, but the stalling could suggest a few days of chop. A close above Wednesday's high in the top third of the day's range would put the price action back on track.

The Nasdaq Composite pulled back in on light volume, but is extended in the short-term and may need to pull back in to the 20-period EMA on the hourly chart, around $4,200.

The same can basically be said of the S&P 500, Russell 2000, and S&P 400, as they are all extended in the short-term and probably should come in to the 20-period EMA on the hourly chart.

As mentioned yesterday, the model is in buy mode, but there are some concerns with the health of the current rally. There is enough positive action out there to warrant some long exposure, especially if this week's breakouts hold and new setups emerge over the next two weeks.

The key here is to remain patient and not chase the price action.

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.