With yesterday's action, many ETFs are close to forming legitimate setups that meet Deron Wagner's trading criteria.

The absence of volume during the recent bounce suggests that the market may be living on borrowed time.

Deron Wagner's bias is still on the short side of the market and he is actively scanning for bearish setups.

For a market to repair itself after a massive selloff, an extended period of low volatility is generally required. The longer that volatility is present, the more likely the market will remain under downward pressure.

Current market conditions are not conducive to swing trading, particularly given the breadth of the current three-day trading range.

The type of damage that was done to the market over the past two weeks is not quickly repaired. Deron Wagner now expects to find considerable selling pressure at former support levels and most profit opportunities on the short side of the market.

Jumping in and swing trading on the short side when the market is in free fall is dangerous because when capitulation comes the counter trend rally is swift and powerful.

With virtually no leadership left in the market, Deron Wagner's focus has shifted to identifying short opportunities when the market bounces.

Given the capitulation in the market yesterday, Deron Wagner expects a sharp reversal in the next few days, but further downside is still possible because volume continues to expand.

The S&P Depository Receipts (SPY) is attempting to recover from eight days of heavy selling and may present a shorting opportunity.