So far, the current pullback in the market has been constructive, with the broad market averages showing bullish action on the hourly and daily charts the past two days.

As mentioned yesterday, the pullback should be short-term in nature and eventually lead to new highs. Our nightly stock and ETF scans continue to produce strong buy setups in ETFs and stocks.

Over the weekend, we noticed a tight consolidation in iShares Peru ($EPU), which rallied off the lows after bottoming out around $30.

During the advance off the lows, the 10-week moving average crossed above the 40-week, which is a bullish trend reversal signal when there are signs of a true bottom in place. The 10wma is trending higher, while the 40wma flattened out and is beginning to turn up.

Note the tight price action on the weekly chart which held above the rising 10wma:



On the daily chart, $EPU has formed an ABC type correction:

Wave A (pullback) = 5/12 high to 5/20 low
Wave B (bounce) = 5/20 low to 5/27 high
Wave C (pullback) = 5/27 high to 6/4 low
In an ABC type correction, the first higher low signals that Wave C is potentially complete. A move above the 6/10 high in $EPU would confirm for us that Wave C is complete and the uptrend should resume shortly. If not, then it could have a bit more work to do but will remain in decent shape as long as it holds above the 50ma.



We have one new buy setup on today's Wagner Daily watchlist in $ITB, which is a pullback entry to the 50-day MA. The setup will be covered in detail in tomorrow's report.

As for the stock side, we continue to see decent patterns emerge and the overall action is solid. Tesla ($TSLA) printed an explosive day for us yesterday, and we are now up about 8% since last week's buy entry.

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.